Assuming the US taxpayer is not under examination by the IRS, to qualify for the SDOP, a US taxpayer must be a resident of the US and have previously filed US tax return for each of the most recent three (3) years and have unreported gross income from foreign financial assets. A US taxpayer that reported all of their foreign income on their US tax return but failed to file an FBAR does not need to enter the SDOP.
When a US taxpayer submits an SDOP they must certify, under penalties of perjury, that their failure to report their foreign income was not willful and provide an explanation of why they did not report the foreign income.
Flott & Co. PC advises US taxpayers that qualify for the SDOP process to determine the correct course of action. While the SDOP is significantly less punitive than the Offshore Voluntary Disclosure Program, those entering the SDOP are subject to a 5% offshore penalty of the highest aggregate value of the US taxpayer’s foreign financial assets during the six (6) years of required FBAR filings. US taxpayers entering the SDOP must also pay the taxes and interest connected to the unreported foreign income.
The IRS has stated that the SDOP will close, just like the Offshore Voluntary Disclosure Program, but has given no date. As such, it is important to US taxpayers with undisclosed foreign accounts or income to resolve their tax matters sooner rather than later. To learn more, visit our affiliated blog: www.doingbusinessacrossborders.com