IRS Streamlined Filing Procedures | Kathryn Meyer Law PC

They are an IRS program for individuals whose failure to report foreign income, file FBARs or file international information returns was not willful. You file three years of corrected returns and six years of FBARs, pay the tax and interest, and certify that your conduct was non-willful. Taxpayers living in the United States also pay a 5 percent penalty on their foreign assets, while eligible taxpayers living abroad pay no penalty.

The procedures trade a smaller, predictable cost for a sworn certification, so the decision deserves care. Correcting past foreign reporting is part of Kathryn Meyer's strategic tax counsel work.

How the streamlined procedures work, step by step

Confirm the general eligibility rules. The procedures are for individuals and estates of individuals only. You need a valid taxpayer identification number, and you cannot be under IRS civil examination for any year or under criminal investigation.
Pick the version. The foreign offshore procedures apply if you meet the IRS's non-residency test; everyone else uses the domestic offshore procedures.
Prepare three years of returns. For each of the most recent three years whose due date (including a properly requested extension) has passed, file complete and accurate returns with every required information return, such as Forms 3520, 5471, 8938 and 8621.
File six years of FBARs. For each of the most recent six years whose FBAR due date has passed, file electronically through the BSA E-Filing System, choose "Other" as the reason for filing late, and enter "Streamlined Filing Compliance Procedures."
Sign the certification. Domestic filers sign Form 14654; filers living abroad sign Form 14653. You certify, under penalties of perjury, that the failures were non-willful and explain the specific reasons in a narrative statement of facts.
Pay and mail. Send the tax, interest and, for domestic filers, the 5 percent penalty with the paper submission to the IRS address in Austin, Texas, that the IRS lists for each version, with "Streamlined Domestic Offshore" or "Streamlined Foreign Offshore" written in red at the top of each return.

Domestic and foreign versions compared

Feature	Streamlined domestic offshore	Streamlined foreign offshore
Who uses it	Taxpayers who do not meet the non-residency test	U.S. citizens and green card holders with no U.S. abode who were outside the U.S. at least 330 full days in any one of the last three years; others who did not meet the substantial presence test in any one of those years
Prior returns	Must already have filed returns (if required) for the three years; files amended returns on Form 1040-X	Files delinquent original returns or amended returns
Years covered	3 tax years and 6 FBAR years	3 tax years and 6 FBAR years
Certification	Form 14654	Form 14653
Penalty	5% miscellaneous offshore penalty	None
Penalties it replaces	Accuracy-related, information return and FBAR penalties	Failure-to-file, failure-to-pay, accuracy-related, information return and FBAR penalties

In both versions, protection ends if a later examination determines that the original return was fraudulent or the FBAR violation was willful. Penalties assessed before the submission are not abated, and any new deficiency the IRS finds in a streamlined return can carry the usual penalties. Those penalties are described in what penalties the IRS can add after an audit.

What "non-willful" means here

The IRS defines non-willful conduct as conduct "due to negligence, inadvertence, or mistake" or the result of "a good faith misunderstanding of the requirements of the law." The certification is made under penalties of perjury, and the IRS says the submissions may be checked against information it receives from banks, financial advisors and other sources. Streamlined returns are not audited automatically, but they can be selected like any other return, and the IRS warns they may lead to examination, additional civil penalties and "even criminal liability, if appropriate."

That is why the honest answer to the willfulness question comes first. Someone who did not know foreign accounts had to be reported is in a different position from someone who moved money to avoid a bank's reporting, chose not to answer the Schedule B question, or was told about the rule and ignored it. For people worried that their conduct was willful, the IRS points to the Criminal Investigation Voluntary Disclosure Practice, explained in amended return or voluntary disclosure: how to correct a past tax mistake.

How the 5 percent penalty is figured

For the domestic version, the penalty is 5 percent of the highest aggregate balance or value of the foreign financial assets subject to it. You add up the year-end balances and year-end values of those assets for each year in the three-year and six-year periods, and take the highest yearly total. An asset counts in an FBAR year if it should have been, but was not, reported on an FBAR. It counts in a tax year if it should have been, but was not, reported on Form 8938, or if it was reported but its income was not. Assets that were properly reported and fully taxed in every year do not count. You must keep the account records behind your calculation and be ready to provide them.

What changes the answer

Unreported income, or only missing forms. The domestic version requires that you failed to report income from a foreign financial asset and pay the tax. If every dollar was reported and taxed and only forms were missed, the IRS's delinquent international information return procedures, or simply filing late FBARs with an explanation, may fit instead (IRS options page; IRS FBAR page).
Where you lived. The 330-day and no-U.S.-abode test, or the substantial presence test for non-citizens, decides between a 5 percent penalty and none (IRS streamlined foreign offshore page). Joint filers using the foreign version must both meet it.
An open examination. If the IRS has opened a civil examination of any year, even one unrelated to foreign assets, the streamlined procedures are closed to you (IRS streamlined page). An examination of that kind is handled through IRS audits and examinations counsel instead.
Unfiled returns. The domestic version accepts only amended returns, so a U.S. resident who never filed for one of the three years does not fit it (IRS streamlined domestic offshore page).
Earlier "quiet" filings. Taxpayers who already filed amended or late returns outside a program may still use the procedures, but penalties already assessed on those filings stay in place (IRS streamlined page).
Foreign trusts and corporations. Forms 3520, 3520-A, 5471 and 8621 belong in the submission, and the IRS now asks streamlined filers to address the section 965 transition tax where it applies to specified foreign corporations (IRS streamlined pages). Large gifts and inheritances from abroad are covered in whether you have to report a gift or inheritance from abroad.

For example: a domestic filer with inherited accounts abroad

For example, imagine a U.S. citizen living in Maryland who inherited two bank accounts in Italy in 2019. She filed her U.S. returns every year but never reported the interest, never filed FBARs and never filed Form 8938, because she believed money held abroad was taxed only abroad. In November 2026 she decides to come forward. Her three-year tax period is 2023 through 2025, and her six-year FBAR period is 2020 through 2025. The combined year-end balances ranged from $180,000 to $240,000, with the highest total at the end of 2024. Because neither account was reported in any covered year, both count, and her penalty is 5 percent of $240,000, or $12,000, plus the tax and interest on three years of unreported interest. She files three Forms 1040-X with Form 8938 attached, six FBARs and Form 14654, describing in her own words why she did not know. If she had lived in Italy, with no U.S. abode and at least 330 full days outside the United States in one of those years, she would have used the foreign version and owed no penalty. This is a hypothetical, not a real case.

Common mistakes with the streamlined procedures

Writing a thin certification. Form 14654 says a submission without a narrative statement of facts is incomplete and will not qualify, and asks for the whole story, favorable and unfavorable.
Using the program when the facts point to willfulness. The procedures offer no protection from criminal liability, and a false certification creates a new problem.
Counting the wrong years. The periods run from due dates that have passed, including properly extended due dates, so the covered years depend on when you file.
Leaving out an asset in the penalty base. Foreign stock held outside an account, foreign mutual funds and foreign hedge or private equity funds can all count, not only bank accounts.
Filing electronically. The returns, certification and payment must go on paper to the address the IRS lists; only the FBARs are filed electronically.
Forgetting future years. The IRS expects full compliance going forward, so the current year's FBAR and Form 8938 must be filed on time.

What to do this week

List every foreign account and asset, with year-end balances for each of the last six years.
Write down, honestly and in order, how you came to hold the assets and when you first learned about the reporting rules.
Confirm that no IRS examination or investigation is open for any year.
Count your days outside the United States for the last three years to see which version applies.
Check what each report requires using whether you have to report foreign bank accounts.
Get advice on the willfulness question before anything is signed or filed.

Frequently asked questions

Will the IRS confirm that it accepted my streamlined submission?

No. The IRS says streamlined returns are processed like any other return, receipt is not acknowledged, and the process does not end with a closing agreement. You may receive a balance due notice or a refund if the tax or interest was calculated incorrectly.

Can I pay the tax over time?

The procedures say the full tax, interest and penalty should be sent with the returns. If that is not possible, the general IRS options are described in the IRS payment plan options and costs, but discuss the effect on the submission first.

Does the streamlined program close the years for audit?

No. The returns can still be selected for examination, and the normal assessment periods apply. Missing foreign information returns can hold a year open, as explained in how far back the IRS can audit.

What if I only missed FBARs and reported all my income?

The IRS says that if it has not contacted you and you are not under investigation, you should file the late FBARs as soon as possible and explain why they are late. The streamlined penalty structure is aimed at people who also failed to report income.

Can I ask for reasonable cause instead?

Yes, outside the program. Delinquent information returns may be filed with a reasonable cause statement, though the IRS may assess penalties first and consider the statement later, except for Forms 3520 and 3520-A. The general standard is explained in whether IRS penalties can be removed.

What happens if the IRS later decides my conduct was willful?

The penalty protection falls away, and FBAR and other penalties can be asserted. If the facts suggest a criminal referral, the warning signs that a civil matter could turn criminal are worth knowing.

Choosing the right way back

The streamlined procedures work well for the right facts and poorly for the wrong ones. Kathryn Meyer spent more than two decades in the IRS Office of Chief Counsel and can help you weigh the willfulness question, choose between the available routes and prepare a submission that holds up. To talk it through, contact the firm or call (571) 560-8674.

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