Offshore Voluntary Disclosure Program

2024 SDOP Audit | Streamlined Domestic Offshore Procedures Lawyer

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An increasing number of submissions under the Streamlined Domestic Offshore Procedures (SDOP) has been subject to an IRS audit; this trend will undoubtedly continue in 2024. In this article, I will explain what an 2024 SDOP Audit is and what a taxpayer should expect during the Audit.

2024 SDOP Audit: Background Information on Streamlined Domestic Offshore Procedures

Streamlined Domestic Offshore Procedures is a voluntary disclosure option offered by the IRS since June of 2014 to noncompliant US taxpayers to settle their past tax noncompliance concerning foreign assets and foreign income at a reduced penalty rate. In order to participate in SDOP, a taxpayer must meet various eligibility requirements. The most important of these eligibility requirements is non-willfulness of prior noncompliance.

SDOP is likely to be the most convenient and the least expensive voluntary disclosure option for taxpayers who are not eligible for Streamlined Foreign Offshore Procedures and whose prior tax noncompliance was non-willful. 

2024 SDOP Audit: Why SDOP Disclosures Are Subject to IRS Audits

SDOP audits originate within the very nature of SDOP.  SDOP voluntary disclosures have certain eligibility requirements.  Once the disclosures are submitted, the IRS does not immediately subject them to an immediate comprehensive review of whether all eligibility requirements are met.  There is a review process, but initially it focuses on whether the formalities of the SDOP were met.

This is very different from the immediate comprehensive audit-like review of all items as part of the voluntary disclosure process that form part of some other programs, such as prior OVDPs (Offshore Voluntary Disclosure Program) or even current IRS Voluntary Disclosure Practice (VDP). These voluntary disclosure options usually also require the signing of Form 906, the Closing Agreement. SDOP does not have that final stage of signing Form 906.

This means that, if a suspicion arises concerning whether a taxpayer met the SDOP eligibility requirements, the only way for the IRS to resolve it is to audit the entire disclosure, particularly on the issue of non-willfulness. As part of the SDOP process, the IRS reserves the right to audit any SDOP submission at any point within three years after the submission of the original SDOP voluntary disclosure package.

2024 SDOP Audit: Process

The exact process of a Streamlined Submission Audit varies from case to case, but all of such audits have a similar format: initial letter with request for a meeting, meeting with an interview, review of submitted documents and (very likely) additional requests for information, interview of other involved individuals (such as a tax preparer) and, finally, the results of an audit are provided by the IRS to taxpayer(s) and/or the representative indicated on Form 2848.

In other words, your 2024 SDOP Audit would commence in a way very similar to a regular IRS audit: a letter is sent to taxpayers and (if there is a Form 2848 on file) to their representative. The letter explains that the IRS decided to examine certain tax returns (usually all three years of amended tax returns) and asks for submission of all documentation and work papers that were used to prepare the amended returns. Additionally, the letter requests that the taxpayers’ representative (or taxpayers if not represented) contact the IRS agent in charge of the audit to schedule the initial meeting.

During the initial meeting, the IRS agent will review (at least to make sure he or she has what is needed) the documents supplied. In larger cases, the IRS will need a lot more time to later examine all of the submitted documents and see if additional documents are needed. If a case is very small, it is possible for an agent to cover everything in the first meeting, but it is very rare.

Also, during an initial meeting, there is going to be an interview of the taxpayer(s). I will discuss the interview separately in a different article.

Once the review of the initial package of documents is concluded, it is very likely that the IRS agent will have questions and additional document requests. The questions may be answered by the taxpayers’ attorney during a separate meeting with the agent; smaller questions may be settled over the phone.

If additional documentation is needed, an IRS agent will send out an additional request to taxpayers and/or their attorney. The answer will most likely need to be provided in writing (and it is actually better to state your position for the record).

Once the IRS completes its interview of other involved parties and reviews all evidence, it will make its decision and submit the results of the audit to the taxpayers and their tax attorney in writing. The taxpayers’ attorney will need to build a strategy with respect to the taxpayers’ response to the audit results depending on whether the taxpayers agree or disagree with the results of the audit.

Differences Between Your 2024 SDOP Audit and Regular IRS Audit

At first, it may seem that there are no big differences between a regular IRS audit and an SDOP audit. While procedurally this may be correct, substantively it is not.

The greatest difference between the two types of IRS audits is the subject-matter involved. While a regular IRS audit will concentrate on the tax returns only, a Streamlined Submission Audit will involve everything: amended tax returns, FBARs, other information returns and, most importantly, Non-Willfulness Certification. In other words, a Streamlined Submission Audit will focus not only on whether the tax forms are correct, but also on whether the taxpayer was actually non-willful with respect to his prior tax noncompliance.

This difference in the subject-matter examination will carry over to other aspects of a Streamlined Submission Audit: the taxpayers’ interview will focus on their non-willfulness arguments, third-party interviews of original tax preparers become a regular feature (this is very different from a regular IRS audit when tax preparers may never be interviewed), and the final IRS results must necessarily make a decision on whether to challenge the taxpayers’ non-willfulness arguments.

Failure by a taxpayer to sustain his non-willfulness arguments may result in a disaster for the taxpayer with a potential referral to the Tax Division of the US Department of Justice for a criminal investigation.

This is why it is so important for a taxpayer subject to an SDOP Audit to retain the services of an experienced international tax lawyer to handle the audit professionally.

Contact Sherayzen Law Office for Professional Help With Your 2024 SDOP Audit 

If your submission under the Streamlined Domestic Offshore Procedures is being audited by the IRS, contact Sherayzen Law Office as soon as possible. Our international tax law firm is highly experienced in offshore voluntary disclosures (SDOP, SFOP, “noisy disclosures”, “quiet disclosures”, et cetera) and the IRS audits of voluntary disclosures, including the audits of SDOP submissions.

 We can Help You during Your IRS Audit!  Contact Us Today to Schedule Your Confidential Consultation!

Streamlined Domestic Offshore Procedures Lawyer: 2024 SDOP Advantages

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Since 2014, Streamlined Domestic Offshore Procedures (“SDOP”) has probably been the most popular offshore voluntary disclosure option, and I predict that it will remain so in the year 2024. In this article, I would like to explore main four 2024 SDOP advantages which US taxpayers should take into account while considering an offshore voluntary disclosure this year.

2024 SDOP Advantages: Background Information and General Requirements

The IRS created the Streamlined Domestic Disclosure as an offshore voluntary disclosure option on June 18, 2014. The IRS specifically the designed Streamlined Domestic Disclosure to address the critique of many practitioners and taxpayers that the 2012 OVDP did not adequately deal with US taxpayers who non-willfully violated their US tax obligations (for example, in cases where the taxpayers simply did not know about the existence of FBAR or Form 8938).

Any taxpayer can participate in the SDOP as long as he satisfies all six parts of this option’s eligibility criteria: US tax residency, not eligible for Streamlined Foreign Offshore Procedures (“SFOP”), original US tax returns filed for the past three years, foreign income and information return (such as FBAR or Form 8938) violations, absence of IRS examination or investigation and non-willfulness.

If a taxpayer satisfies the eligibility criteria, he then must comply with all of the required submissions. The key requirement here is the certification under the penalty of perjury that the taxpayer’s prior tax noncompliance was non-willful. This requirement is the heart of the Streamlined Domestic Disclosure and must be approached with special care.

The other requirements include filing of amended tax returns for the past three years (with all of the necessary information returns), filing FBARs for the past six years, payment of tax due with interest and payment of Miscellaneous Offshore Penalty. Other requirements may also apply depending on the specific situation of a taxpayer.

2024 SDOP Offers a Number of Advantages to Noncompliant US Taxpayers

While the list of the requirements above may seem like a lot of work, in reality, Streamlined Domestic Offshore Procedures definitely offers a number of advantages compared to other offshore voluntary disclosure options. I will discuss in this article only the main four advantages.

Keep in mind that the SDOP may not always be advantages to taxpayers. There are plenty of situations where other offshore voluntary disclosure options may be superior to the SDOP.

I also wish to emphasize that the analysis of advantages or disadvantages of a particular voluntary disclosure option is highly fact-specific. I strongly recommend that you contact Sherayzen Law Office for a detailed analysis of your voluntary disclosure options before you even attempt to proceed with your offshore voluntary disclosure.

2024 SDOP Advantages: Easier Risk Management

One of the greatest advantages (though, the one rarely discussed on the Internet) of the Streamlined Domestic Offshore Procedures is the opportunity this option offers to manage the voluntary disclosure risks. We can be even more precise – to manage the risk-reward ratio.

The 2024 SDOP is a disclosure option that offers a definitive transparent calculation of risks and rewards.  While the risks associated with non-willfulness are not always easy to determine, the rest of the SDOP framework, such as penalty rate, calculation of Penalty Base and other factors are generally (though, not always) much clearer than in riskier disclosure options such Noisy Disclosure, Delinquent International Information Return Submission Procedures (“DIIRSP”) and Reasonable Cause disclosures.

2024 SDOP Advantages: Legal Standard

Closely related to the risk management factor discussed above is another SDOP advantage of a lower legal standard of proof — non-willfulness. While proving non-willfulness can be a complicated and difficult process, it is still much easier than satisfying the reasonable cause standard.

The reasonable cause standard is immensely more difficult and tougher to meet for a taxpayer. Yet it is the statutory standard for penalty removal for pretty much every US international tax form outside of a voluntary disclosure. Reasonable cause is also the standard for even some other voluntary disclosure programs (for example, DIIRSP). Of course, IRS VDP does not require proving even non-willfulness, but its penalty system is a lot harsher than that of the SDOP.

2024 SDOP Advantages: Relatively Low Penalty Rate

One of the most cited advantages of the 2024 SDOP is the low penalty rate of 5%. This is usually a huge advantage over the very high IRS Voluntary Disclosure Practice (“VDP”) penalty rates or various penalties outside of a voluntary disclosure program (including in many cases FBAR non-willful penalties). This is not always the case, but it is true in most non-willful cases.

2024 SDOP Advantages: Shortened Voluntary Disclosure Period

Finally, another great advantage of Streamlined Domestic Offshore Procedures is the smaller number of years covered by the voluntary disclosure period. Unlike the old OVDP voluntary disclosure period (which used to cover eight years of FBARs and tax returns) and the current VDP voluntary disclosure period of up to six years, SDOP’s voluntary disclosure period only encompasses the years which are covered by a regular statute of limitations.

In other words, it only includes the past six years of FBARs (occasionally seven) and past three years of tax returns. Obviously, this is a lot more convenient than VDP.  It should be noted that a voluntary disclosure that involves an expatriation will require an increased number of amended tax returns.

Contact Sherayzen Law Office for Professional Help with Streamlined Domestic Disclosure

Even with all of its advantages, Streamlined Domestic Offshore Procedures may still be a very complex process that requires professional attention. There are a number of pitfalls that may seriously undermine the advantages of a Streamlined Domestic Disclosure. Sometimes, unrepresented taxpayers may also make mistakes that may have a disastrous result during a subsequent IRS audit.

This is why you need the professional help of Sherayzen Law Office. Our experienced legal team has helped hundreds of US taxpayers resolve their prior noncompliance with US international tax laws, including by using Streamlined Domestic Offsshore Procedures.

We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

Indiana Streamlined Disclosure Lawyer | International Tax Attorney

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Indiana is a home to a small but growing immigrant community with at least 5% of the population foreign-born and another 5% of the population that has at least one immigrant parent. The top countries of original for immigrants are: Mexico, India, China, Myanmar and the Philippines. Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately some of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Indiana streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Indiana streamlined disclosure lawyer and outline who belongs to this category of lawyers.

Indiana Streamlined Disclosure Lawyer: International Tax Attorney

From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Indiana streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.

Indiana Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures

As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.

This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.

Indiana Streamlined Disclosure Lawyer: Geographical Location Does Not Matter

While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.

This means that you are not limited to Indiana when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Indiana or Minnesota.

Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Indiana might have had in the past over the out-of-state lawyers. This has already been established in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.

Sherayzen Law Office May Be Your Indiana Streamlined Disclosure Lawyer

Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRS VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Indiana, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Streamlined Domestic Offshore Procedures Lawyer: 2024 SDOP Eligibility Requirements

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The introduction of the Streamlined Domestic Offshore Procedures (SDOP) in 2014 meant that the IRS finally recognized that there was a very large number of U.S. taxpayers who were non-willful with respect to their inability to comply with numerous obscure complex requirements of U.S. tax laws.  Since 2014, SDOP has been a highly successful voluntary disclosure option that I predict will remain as popular in 2024.  For this reason, in this short article, I will review the main six 2024 SDOP eligibility requirements.

2024 SDOP Eligibility Requirements: US Taxpayer

The first main requirement to be able to utilize SDOP is that the applicant is a US taxpayer. In the context of SDOP, this term is equivalent to a US tax resident.  This means that he should be one of the following: a U.S. citizen, U.S. lawful permanent resident, or he must have met the substantial presence test.

The substantial presence test is outlined in 26 U.S.C. 7701(b)(3). In general, under 26 U.S.C. §7701(b)(3), an individual meets the substantial presence test if the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier) equals or exceeds 183 days.

2024 SDOP Eligibility Requirements: Not Eligible for SFOP

The second requirement to participate in SFOP is that the taxpayer fails to meet the non-residency requirements of Streamlined Foreign Offshore Procedures (SFOP). I describe the non-residency requirements of SFOP in detail in this article.

What happens if spouses file a joint tax return and one of the spouses fails the non-residency requirement but the other spouse meets it? In this case, both spouses are still eligible to participate in the SDOP.

2024 SDOP Eligibility Requirements: US Tax Returns Filed

In order to participate in SDOP, the taxpayer must have previously filed a US tax return (if required) for each of the most recent three years for which the US tax return due date (or properly applied for extended due date) has passed.  In other words, a taxpayer cannot file a late original tax return as part of SDOP; he can only amend the returns that were already filed.

2024 SDOP Eligibility Requirements: Foreign Income and Information Return Violations

Another important eligibility requirement for SDOP is that the taxpayer must have failed to report foreign income and pay US taxes on it AND may have failed to file FBAR and/or and/or one or more international information returns (e.g. Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) with respect to the foreign financial asset that generated the foreign income.  In other words, foreign income reporting violation is crucial for the SDOP participation.

2024 SDOP Eligibility Requirements: Non-Willfulness

This is the most important and most critical eligibility requirement to the participation in the Streamlined Domestic Offshore Procedures. The taxpayer’s violations of the applicable US international tax requirements must be non-willful.

The non-willful nature of violations must apply to everything: the failures to report the income from a foreign financial asset, pay tax as required by US tax law, file FBARs and file other international information returns (such as Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621). If the failure to file the FBAR and any other information returns was willful, the participation in the Streamlined Domestic Offshore Procedures is not likely to be possible.

2024 SDOP Eligibility Requirements: SDOP Participation Must Be Timely

Finally, the fifth SDOP eligibility requirement is that the participating taxpayer is not subject to an IRS civil examination or an IRS criminal investigation, irrespective of whether the examination/investigation is related to undisclosed foreign financial assets or involves any of the years subject to the voluntary disclosure. If the taxpayer is already subject to such an examination/investigation, his participation in the Streamlined Domestic Offshore Procedure would not be considered timely.

Contact Sherayzen Law Office for Legal Help With Your Offshore Voluntary Disclosure

If you have undisclosed foreign accounts or any other offshore assets, contact Sherayzen Law Office for professional legal help. Our experienced international tax law firm will thoroughly analyze your case, estimate your current IRS penalty exposure, and determine your eligibility for the available voluntary disclosure options, including the SDOP, SFOP and other voluntary disclosure options.

Contact Today Us to Schedule Your Confidential Consultation!

Ohio Streamlined Disclosure Lawyer | International Tax Attorney

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Ohio has a growing immigrant community with at least 5% of the population foreign-born and another 5% of the population that has at least one immigrant parent. The top countries of original for immigrants are: India, Mexico, China, the Philippines and Canada; more than half of them are naturalized US citizens and more than 42% of them are college educated. Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately a number of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Ohio streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Ohio streamlined disclosure lawyer and outline who belongs to this category of lawyers.

Ohio Streamlined Disclosure Lawyer: International Tax Attorney

From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Ohio streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.

Ohio Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures

As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.

This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.

Ohio Streamlined Disclosure Lawyer: Geographical Location Does Not Matter

While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.

This means that you are not limited to Ohio when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Ohio or Minnesota.

Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Ohio might have had in the past over the out-of-state lawyers. This has already been established in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.

Sherayzen Law Office May Be Your Ohio Streamlined Disclosure Lawyer

Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRS VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Ohio, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!