The streamlined procedures have a different set of requirements depending on whether the taxpayer currently resides within or outside of the United States. If you are eligible to use the Streamlined Foreign Offshore Procedures, then you must follow particular steps. If you fail to properly comply with the steps, then your application will be rejected for the streamlined procedures. Instead, your tax return will simply be processed in the usual manner and you will not be able to avail yourself of any of the benefits of the streamlined foreign offshore procedures.

What are the Eligibility Requirements of the Foreign Streamlined Procedures?

As a general rule, there are several components to the eligibility requirements for the Streamlined Foreign Offshore Procedures under the Offshore Voluntary Disclosure Program. Obviously, one of the most important criteria relates to the residency of the taxpayer. Whether a taxpayer qualifies as a U.S. resident or not will determine which set of streamlined procedures to use. For the foreign offshore streamlined procedures, the taxpayer must meet the applicable non-residency requirement described by the IRS in the Streamlined Procedure instructions (1). The second requirement for eligibility is that the taxpayer must have failed to report income from the foreign financial asset and pay the associated tax. An additional possible factor leading to eligibility for the streamlined foreign offshore procedures is that the taxpayer has not filed FBAR forms or other required informational reports with respect to a foreign financial account. However, this element is not required as long as the other requirements are met, although it will be required that all outstanding FBARs are filed as a condition of the program (2). Finally, the taxpayer must be prepared to show that these failures were the result of non-willful conduct, defined as “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.” (3)

What is the Non-Residency Requirement for Participants in the Streamlined Foreign Offshore Procedures?

Individual U.S. citizens and lawful permanent residents, as well as estates of U.S. citizens or lawful permanent residents, can possibly qualify for the streamlined foreign offshore procedures if they meet the non-residency requirement. The individual taxpayer may qualify for the non-residency requirements if, “in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days” (4). The meaning of “abode” for these purposes is defined by IRC section 911, which clarifies that mere temporary presence in the United States will not qualify under these procedures (5). In addition, maintaining a dwelling in the United States will also not necessarily suffice to create an “abode” for the taxpayer if the other requirements are not met (6).

A different set of conditions apply to individual taxpayers who are not U.S. citizens or lawful permanent residents. This subset of foreign taxpayers may qualify for the non-residency requirement if “in any one or more of the last three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not meet the substantial presence test of IRC section 7701(b)(3).”

Under the Substantial Presence Test of IRC section 7701(b)(3), a taxpayer will be considered as a U.S. resident for tax purposes when they meet certain presence requirements for the calendar year. Specifically, to meet this test, a taxpayer must be physically present in the United States at least: 1) 31 days during the current year, and 2) 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting a) all the days the taxpayer was present in the current year; b) 1/3 of the days the taxpayer was present in the first year before the current year; and c) 1/6 of the days the taxpayer was present in the second year before the current year. If the taxpayer meets this test, they are considered as U.S. resident for tax purposes. Read this article for more information about the Substantial Presence Test. Thus, for the purposes of the Streamlined Foreign Offshore Procedures, the taxpayer may be eligible to participate in the program if he or she fails the Substantial Presence Test. This is a very important rule to remember.

Important Points to Remember About the Streamlined Foreign Offshore Procedures

As mentioned above, the rules applying to taxpayers for the streamlined foreign offshore procedures are distinct from those applying under the streamlined domestic offshore procedures. The foreign procedures are specifically tailored to taxpayers who are not U.S. residents. Of this subset of taxpayers, a different non-residency requirements applies to green card holders versus other foreign taxpayers. Regarding these residency requirements, the following important points should be remembered:

  • To qualify for the Streamlined Foreign Offshore Procedures instead of the Streamlined Domestic Offshore Procedures, the taxpayer must meet the relevant non-residency requirement set forth by the IRS.
  • For individuals who are U.S. citizens or lawful permanent residents (i.e., “green card holders”), the taxpayer can satisfy the non-residency requirement if the taxpayer did not have a U.S. abode for a certain amount of time.
  • For individuals who are U.S. citizens or lawful permanent residents, the taxpayer can satisfy the non-residency requirement if the taxpayer did not satisfy the conditions of the substantial presence test.

How a Tax Attorney Can Help

If you have undisclosed offshore foreign accounts or assets, you may be eligible to participate in the streamlined procedures under OVDP. In order to evaluate whether the streamlined procedures apply to your international tax situation, you should consider consulting a knowledgeable tax attorney.

The Tax Lawyer - William D Hartsock Tax Attorney Inc. has been successfully helping clients with tax issues related to their foreign assets since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.

Tax Law References

  1. U.S. Taxpayers Residing Outside the United States, http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Res....
  2. U.S. Taxpayers Residing Outside the United States, http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Res....
  3. U.S. Taxpayers Residing Outside the United States, http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Res....
  4. U.S. Taxpayers Residing Outside the United States, http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Res....
  5. IRC § 911.
  6. IRC § 911.


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