Posts

2024 Streamlined Domestic Offshore Procedures: Pros and Cons

/in , , /by

As was the case in the year 2023, I expect that Streamlined Domestic Offshore Procedures will continue to be the flagship offshore voluntary disclosure option in 2024 for US taxpayers who reside in the United States. This is why noncompliant US taxpayers should understand well the main advantages and disadvantages of participating in the 2024 Streamlined Domestic Offshore Procedures.

2024 Streamlined Domestic Offshore Procedures: Background Information and Purpose

The IRS created the Streamlined Domestic Offshore Procedures (usually abbreviated as “SDOP”) on June 18, 2014, though the Certification forms became available only a few months later. Since its introduction, Streamlined Domestic Offshore Procedures quickly eclipsed the then-existing IRS Offshore Voluntary Disclosure Program (“OVDP”) and became the most popular offshore voluntary disclosure option for US taxpayers who reside in the United States. As we discuss the advantages of the 2024 SDOP, you will quickly understand the reason for this meteoric rise in popularity of the SDOP.

The main purpose of the Streamlined Domestic Offshore Procedures is to encourage non-willful US taxpayers to voluntarily resolve their prior noncompliance with US international tax reporting requirements in exchange for a reduced penalty, simplified disclosure procedure and a shorter disclosure period. Pretty much any non-willful US international tax noncompliance can be resolved through SDOP: foreign income, FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera.

2024 Streamlined Domestic Offshore Procedures: Main Advantages

In exchange for a voluntary disclosure of their prior tax noncompliance through SDOP, US taxpayers escape income tax penalties and pay only a one-time Miscellaneous Offshore Penalty with respect to their prior failures to file the required US international information returns. It is important to emphasize that the Miscellaneous Offshore Penalty replaces not only FBAR penalties, but also penalties for noncompliance with respect to other US international information returns, such as Forms 5471, 8865, 926, et cetera. Depending on the specific circumstances of a case, the Miscellaneous Offshore Penalty is usually below the combined potential penalties normally associated with failure to file these forms. In other words, noncompliant taxpayers can greatly reduce their IRS noncompliance penalties through their participation in the Streamlined Domestic Offshore Procedures. This is one of the most important SDOP benefits.

Another advantage of the Streamlined Domestic Offshore Procedures is the limited procedural scope of this voluntary disclosure option. What I mean by this is that the taxpayers should only submit the forms covered by the general statute of limitations unless they choose (i.e. not required, actually choose to do so) to do otherwise. The taxpayers only need to file three (sometime even less) amended US tax returns and six FBARs (sometimes seven and sometimes less than six). This limited disclosure stands in stark contrast with other major voluntary disclosure initiatives, such as 2014 OVDP (which required filings for the past eight years).

Moreover, despite the limited scope of the SDOP filings, taxpayers who utilize the Streamlined Domestic Offshore Procedures are usually able to fully resolve their prior US international tax noncompliance issues even if these years are not included in the actual SDOP filings. This means that the participating taxpayers are able “wipe the slate clean” – i.e. to erase their prior US international tax noncompliance from the time when it began. I should warn, however, that this is not necessarily always the case; I have already encountered efforts from the IRS to open years for which amended tax returns were not submitted (there were specific circumstances, however, in all of these cases that resulted in this increased IRS interference).

The last major advantage of the Streamlined Domestic Offshore Procedures is that this option only requires to establish non-willfulness rather than reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.

2024 Streamlined Domestic Offshore Procedures: Main Disadvantages

Usually, participation in the Streamlined Domestic Offshore Procedures is highly advantageous to noncompliance taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will concentrate only on the three most important of them.

First, this voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years. This requirement is the exact opposite of the Streamlined Foreign Offshore Procedures (“SFOP”) which allows for the late filing of original returns.

The problem is that there is a large segment of taxpayers who were perfectly non-willful in their prior US international tax noncompliance, but they never filed their US tax returns either due to special life circumstances (such as death in the family, illness, unemployment, et cetera), they were negligent or they believed that they were not required to file them (especially in situations where all of their income comes from foreign sources). These taxpayers would be barred from participating in the SDOP.

Second, when they participate in the Streamlined Domestic Offshore Procedures, the taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SDOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.

The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures. By the way, this decision should be made only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.

Finally, participation in the Streamlined Domestic Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP (prior to its closure), SDOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package This means that going through Streamlined Domestic Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.

Contact Sherayzen Law Office for Professional Help With 2024 Streamlined Domestic Offshore Procedures

If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures. We can also help you!

Contact Us Today to Schedule Your Confidential Consultation!

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer | International Tax Attorney

/in , /by

Mr. Eugene Sherayzen, the founder and owner of Sherayzen Law Office, Ltd., is a premier Minneapolis Minnesota Voluntary Disclosure Lawyer. Why is this the case? Let’s explore the top five reasons for it.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Experience

Mr. Sherayzen started practicing law at the end of 2005. In other words, he has been an international tax lawyer for over 13 years. During this time, he has successfully conducted hundreds of voluntary disclosures for US taxpayers all around the world.

He is a highly experienced lawyer in every type of a voluntary disclosure: OVDP/OVDI (while these programs existed), Streamlined Domestic Offshore Procedures (“SDOP”), Streamlined Foreign Offshore Procedures (“SFOP”), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause Disclosures.

During 2014-2016, Mr. Sherayzen also conducted the Transition to Streamlined Disclosure for some of his OVDP clients. Moreover, starting 2017, he has also helped his clients with the IRS audits of voluntary disclosures done pursuant to SDOP and SFOP. During all of these years, Mr. Sherayzen also helped clients with amendment of Forms 906 signed pursuant to OVDP or OVDI.

As a result of such an intense and diverse voluntary disclosure practice, Mr. Sherayzen has accumulated a tremendous, in many ways unique, amount of experience in offshore voluntary disclosures.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Knowledge

Knowledge comes with experience. Mr. Sherayzen may be considered a true expert on offshore voluntary disclosure. Not only does he possess a deep understanding of substantive US international tax law, but his extensive experience with offshore voluntary disclosures endowed him with a profound knowledge of the procedural aspects of offshore voluntary disclosures.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Ethical Creativity

This combination of knowledge and experience allows Mr. Sherayzen to devise creative ethical legal strategies for his clients’ offshore voluntary disclosures. Each strategy is customized based on the facts of each case. All pros and cons are carefully considered to achieve the necessary balance of risks and rewards. Potential IRS challenges are considered and prepared for. Each alternative strategy is discussed with each client in order to choose the most agreeable one to the client.

It should be emphasized that Mr. Sherayzen offers only those voluntary disclosure strategies which comply with the legal and ethical standards demanded by the IRS as well as the legal profession.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Customization

Mr. Sherayzen rejects “one size fits all” approach to offshore voluntary disclosure and strongly believes a case strategy must be considered only in light of the specific facts of each case. Too often, with dismay, he sees how many accountants and even lawyers herd their clients into one approach, charging a flat fee for it, without the proper consideration of specific facts of each case.

Mr. Sherayzen believes that each case is unique and deserves a special consideration of its special facts and circumstances. Each legal strategy must be adjusted to fit these facts and circumstances in order to produce the best result for the client.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Voluntary Disclosure Team

Mr. Sherayzen also counts on the support of a superb voluntary disclosure team of accountants and staff – a team which he has gradually built and trained over the past 13 years. He carefully chose each member of the team and personally trained them to master certain aspects of a voluntary disclosure. The team is not trained only in their specific duties, but also to help each other, creating a sense of comradeship among Sherayzen Law Office employees. Everyone’s work goes through at least two levels of review to assure the highest quality. As a result, Mr. Sherayzen and his team are able to conduct and produce successful highly-efficient high-quality offshore voluntary disclosures.

Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!