Streamlined Domestic Offshore Procedures (SDOP)
Form 1040-X, FinCEN 114, Form 8938, Form 8621
Amended US returns and late FBARs under the Streamlined Domestic Offshore Procedures, for US residents whose foreign account failures were non-wilful.
What does Streamlined Domestic Offshore Procedures (SDOP) involve?
The Domestic route is for US taxpayers living in the US who filed their returns but left foreign income, accounts or assets off them. It costs more than the Foreign route, because a miscellaneous offshore penalty is added to the tax and interest. Like the Foreign route, it rests on a written certification that has to be true.
SFOP and SDOP side by side
The two streamlined routes ask for the same package of returns and FBARs. They differ on where you live, what you pay and which certification you sign.
| Compared | SFOP: Foreign route | SDOP: Domestic route |
|---|---|---|
| Who it is for | US taxpayers living outside the US who missed filings | US taxpayers living in the US who missed filings |
| Residency | For citizens and green card holders, 330 full days outside the US in at least one of the last three years, with no US abode in that year | Does not meet the Foreign route's non-residency test |
| Penalty | None (0%). The cost is the tax and interest due | 5% miscellaneous offshore penalty on the highest aggregate year-end value of the relevant foreign assets |
| Certification | Form 14653 | Form 14654 |
| Returns | Three years of delinquent or amended returns | Three years of amended returns. Original returns must already have been filed |
| FBARs | Six years of delinquent FBARs | Six years of delinquent FBARs |
| Conduct | Non-wilful, certified under penalty of perjury | Non-wilful, certified under penalty of perjury |
| Closed when | The IRS has opened an examination or investigation for any year | The IRS has opened an examination or investigation for any year |
Which one applies to me?
Take the questions in order. They are written for US citizens and green card holders. Other US taxpayers meet the non-residency test differently, and we check it with them.
Question 1: Has the IRS opened an examination or investigation of any year, or was the failure wilful?
Yes
Neither streamlined route is available. Speak to us before filing anything, because the order of the next steps matters.
No
Go on to the next question.
Question 2: In at least one of the last three years, were you outside the US for 330 full days with no US abode?
Yes
The Foreign route (SFOP) is the one to look at: no penalty beyond tax and interest, certified on Form 14653.
No
Go on to the next question.
Question 3: Did you file a US tax return for each of those three years?
Yes
The Domestic route (SDOP) is the one to look at: amended returns, the 5% penalty, certified on Form 14654.
No
Neither streamlined route fits as things stand. Other IRS procedures may, and we review the facts before recommending one.
This is a first sort, not a ruling. Residence, abode and conduct each turn on the facts of every year, and we confirm the route before any work begins.
Forms and filings involved
- Form 1040-X
The form for correcting a Form 1040 already filed, whether to add missed income, switch relief methods or claim a refund.
- FinCEN 114
The annual report of foreign accounts filed with FinCEN, separate from the tax return, once combined balances pass the threshold.
- Form 8938
The FATCA asset statement attached to the tax return, with higher thresholds for filers who live abroad than for those in the US.
- Form 8621
The annual return for US persons holding passive foreign investment companies, which includes most UK funds, unit trusts and ETFs.
- Form 1040
The annual federal return for US citizens, green card holders and US residents, reporting worldwide income wherever the filer lives.
Putting foreign assets right from inside the US
The Streamlined Domestic Offshore Procedures require three years of amended tax returns with all required information returns, six years of delinquent FBARs, payment of the tax and interest due, and a non-wilful certification on Form 14654.
The route works through amended returns because it is open only to people who filed a US return for each of those years. Someone who filed nothing for those years cannot use it as things stand.
The difference between the routes is cost. On the Domestic route the IRS charges a 5% miscellaneous offshore penalty on the highest aggregate year-end value of the relevant foreign assets. Which assets enter that base, and at what value, is worked out asset by asset. The Foreign route charges no penalty, but only for people who meet its non-residency test, which in practice means having lived outside the US for at least one of the last three years.
Neither route is available once the IRS has opened a civil examination or a criminal investigation for any year, and neither protects conduct that was wilful. The certification is made under penalty of perjury and has to explain, in your own account, how the failures happened. For people who owe no extra tax and missed only information returns or FBARs, the delinquent submission procedures may fit better. We review the facts first and say plainly which route, if any, applies.
What an SDOP submission contains
- 01
- Eligibility review, including returns filed for each of the three years
- 02
- Amended returns with every required information return
- 03
- Delinquent FBARs filed through FinCEN with the streamlined explanation
- 04
- Non-wilful certification on Form 14654, drafted from your own account
- 05
- Miscellaneous offshore penalty base calculated asset by asset
Who this is for
US residents whose returns left out UK accounts, pensions or investments
- Americans who moved back from the UK and kept accounts there
- Green card holders in the US with savings or rental income abroad
- US residents who inherited foreign accounts and never reported them
Why US UK Tax Returns
Each return is prepared with the other country's return open beside it, so a credit, election or disclosure on one is supported by the other.
One File
US and UK returns prepared in the same engagement and reconciled line by line.
Primary Sources
Every position traced to the Code, the treaty, IRS instructions or HMRC guidance.
Scope First
Returns, forms, years and fee agreed in writing before work begins.
The Same People
The team that files this year carries the elections and credits into the next.
Questions we are asked
I live in the US. Can I use the Foreign route instead?
Only if you meet its non-residency test for at least one of the last three years. For a citizen or green card holder that means 330 full days outside the US with no US abode in that year. Someone who moved to the US recently may still qualify on an earlier year. Otherwise the Domestic route is the streamlined option, and we check the day counts year by year before advising.
How is the 5% penalty worked out?
It is charged on the highest aggregate year-end value of the foreign financial assets in the penalty base across the years the submission covers. An asset falls into the base if it should have been reported and was not, or if its income was left off a return. An asset that was correctly reported, with its income, in every year stays out. We build the schedule asset by asset before anything is filed.
I never filed US returns at all. Is the Domestic route open to me?
Not as things stand. The Domestic route requires that a US return was filed for each of the three years, so it works by amending them. If you meet the Foreign route's non-residency test, that route accepts delinquent original returns. If you meet neither, other IRS procedures may fit, and the choice between them depends on the amounts involved and the history behind the failure.
Does the Domestic route help if my failure was wilful?
No. Both streamlined routes are for non-wilful conduct only, certified under penalty of perjury, on Form 14654 for the Domestic route. Non-wilful means negligence, inadvertence, mistake, or a good faith misunderstanding of the law. Where the facts point the other way, a false certification creates a worse problem than the original failure, and a different procedure needs to be considered with legal advice.
Are the FBARs filed with the amended returns?
No. FBARs are filed electronically with FinCEN, never with a tax return. The delinquent FBARs go through FinCEN's filing system marked as part of a streamlined submission, while the amended returns, the payment and Form 14654 go to the IRS. The two sets have to tell the same story about each account, so we prepare them together from the same statements.
Primary sources
What this page says is drawn from the official material below. Read it yourself; we would rather be checked than trusted.
Last reviewed
- Streamlined procedures for U.S. taxpayers residing in the United States (opens in a new tab)
- Streamlined filing compliance procedures (opens in a new tab)
- Streamlined procedures for U.S. taxpayers residing outside the United States (opens in a new tab)
- Report foreign bank and financial accounts (opens in a new tab)
Part of our guide
Behind on US Taxes in the UK: IRS Streamlined Filing, Accidental Americans and Renunciation
From the Blog
Ready to talk it through?
Tell us where you live, what you hold and which years are outstanding. We will say what applies and what it involves before any work begins.
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