SFOP or SDOP? Which streamlined path fixes unreported foreign income and missed FBARs?

Three questions sort it out: has the IRS already started looking at you, was it willful, and did you leave income off your returns? Streamlined is only for non-willful cases with unreported foreign income where the IRS hasn't opened an exam. Meet the foreign residency test and it's SFOP; don't, and it's SDOP. If all your income was reported and only the FBAR or an information return is missing, you usually file late under the regular procedures.

Most people find out years later. A new preparer asks about accounts in China, a bank sends a questionnaire, or it comes up during a home purchase or an immigration step. The chart below puts the four paths side by side. Read from the top and follow the first row that fits.

Rule out an open exam and willful conduct first, then ask whether income was missed and whether you meet the foreign residency test.

Your situation	Path	What you file	Penalty
The IRS has opened a civil exam of any year (even one unrelated to foreign assets), or you're under criminal investigation	Streamlined isn't available	Talk to a CPA or attorney and work through the exam	Regular rules
You willfully hid income or accounts	IRS Criminal Investigation Voluntary Disclosure Practice (VDP)	Form 14457 preclearance, then the full application	Generally far heavier than streamlined, and no guarantee against prosecution
Non-willful; foreign income missed; you meet the foreign residency test in one of the last 3 years	SFOP (Streamlined Foreign Offshore)	3 years of original 1040s or 1040-Xs with all information returns, 6 years of FBARs, Form 14653	None if you qualify; tax and interest only
Non-willful; foreign income missed; you don't meet the residency test; you filed returns for all 3 years	SDOP (Streamlined Domestic Offshore)	3 years of 1040-Xs with all information returns, 6 years of FBARs, Form 14654	5% miscellaneous offshore penalty, plus tax and interest
All income reported and tax paid; only the FBAR or Forms 8938, 5471, 3520 and similar are missing	Late FBAR / DIIRSP (regular procedures)	E-file the FBAR with a late-filing explanation; file the information returns as required with a reasonable cause statement	Relief isn't guaranteed; the IRS reviews your explanation

U.S. citizens, green card holders and other U.S. tax residents are taxed on worldwide income. If your foreign financial accounts total more than $10,000 at any point in the year, you file an FBAR (FinCEN 114). If your foreign financial assets pass the Form 8938 threshold (for a single filer living in the U.S., more than $50,000 at year-end or $75,000 at any time), you also attach Form 8938 to your 1040.

• FBAR: if you have a financial interest in or signature authority over foreign accounts and their combined maximum values pass $10,000, you file. Bank, securities and brokerage accounts all count, and so do insurance or annuity policies with a cash value and shares in a publicly offered fund. Convert foreign currency at the Treasury rate for the last day of the year and round up to the next whole dollar. It's due April 15, with an automatic extension to October 15, and it's e-filed through FinCEN's BSA E-Filing System, not mailed with your 1040.
• Form 8938: filed with your 1040, with thresholds that depend on filing status and whether you live abroad (see the table below). The penalty for not filing is $10,000. If you still haven't filed 90 days after an IRS notice, another $10,000 applies for each 30 days, up to an additional $50,000.
• Other international forms that often come up: Form 3520 for gifts or bequests from foreign individuals totaling more than $100,000 in a year; Form 5471 for certain interests in a foreign corporation and Form 8865 for a foreign partnership; Form 8621 for passive foreign investment companies (PFICs) such as foreign mutual funds; Forms 3520 / 3520-A for foreign trusts.
• FBAR and Form 8938 are separate. The thresholds, the rules and where they're filed all differ, and plenty of people owe both.

Both are for individuals (and estates of individuals) only. The failure has to be non-willful, and you certify that yourself. You need a valid taxpayer identification number. And if the IRS has opened a civil exam of any year, or you're under criminal investigation, neither one is available.

• Non-willful: the IRS defines it as conduct due to negligence, inadvertence or mistake, or conduct resulting from a good-faith misunderstanding of the law. The certification is signed under penalties of perjury.
• An open exam shuts the door. Once the IRS has opened a civil exam of any tax year, even one that has nothing to do with foreign assets, streamlined is off the table. Timing matters, and earlier is better.
• Taxpayer ID: citizens and residents generally need a valid SSN. If you aren't eligible for one, you can use an ITIN or include a complete ITIN application (Form W-7). If you're eligible for an SSN but don't have one, you don't get the streamlined penalty terms.
• Past OVDP letters: if you submitted an OVDP voluntary disclosure letter on or after July 1, 2014, you can't use streamlined.
• Past quiet disclosures: if you already amended returns on your own outside the program, you can still use streamlined, but penalties that were already assessed won't be abated.

For U.S. citizens and green card holders: in at least one of the 3 most recent years whose return due date (including a valid extension) has passed, you were physically outside the U.S. for at least 330 full days and you had no U.S. abode. For non-citizens without a green card: in at least one of those 3 years, you didn't meet the substantial presence test. On a joint return, both spouses must qualify.

• Both in the same year. 330 days abroad one year and no U.S. abode another year doesn't work.
• What counts as an abode: the IRS borrows the definition from IRC §911 and Publication 54, which looks at where your life and economic ties are centered. Being in the U.S. temporarily, or keeping a home here, doesn't necessarily put your abode in the U.S., but it depends on the facts.
• Passing the Form 2555 test isn't enough on its own. SFOP borrows only the abode definition from §911, and the streamlined rules set their own residency test. The Form 2555 physical presence test can use any 12 consecutive months that span two years; SFOP looks at each tax year separately.
• Non-citizens without a green card: Form 14653 requires a substantial presence test computation showing your U.S. days for the 3 covered years and the 2 years before. Without a complete computation, the submission is incomplete and doesn't qualify.
• What you file: for each of the 3 years, an original 1040 if you never filed or a 1040-X if you did, with every required information return (for example, Forms 3520, 5471 and 8938); FBARs for the last 6 years; and a signed original Form 14653, with copies attached to each return and information return (not to the FBARs). Write "Streamlined Foreign Offshore" in red at the top of the first page of each return and information return.
• Penalties: if you qualify and follow every instruction, there are no failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties. You still pay the tax and statutory interest. If a later audit finds fraud or a willful FBAR violation, the favorable terms are lost.

SDOP is for people who don't meet the foreign residency test but filed U.S. returns for each of the last 3 years. You file 3 years of 1040-Xs with all information returns, 6 years of FBARs and Form 14654, and you pay a 5% miscellaneous offshore penalty. The base: for each year in the 3-year return period and the 6-year FBAR period, add up the December 31 values of the foreign financial assets that should have been reported and weren't, then take the highest year.

• Amended returns only. SDOP accepts only 1040-Xs. If you never filed a return for one of the 3 years, SDOP can't fix it, and you need a different plan.
• Red ink: write "Streamlined Domestic Offshore" at the top of the first page of each 1040-X and information return. The IRS page calls this critical.
• What's in the base: accounts that should have been on an FBAR for a year in the FBAR period and weren't; assets that should have been on Form 8938 for a year in the return period and weren't, or were reported but their income wasn't.
• What's out: years that were fully compliant count as zero; accounts you had no personal financial interest in (such as signature-only authority over an employer's account); assets that don't belong on an FBAR or Form 8938 at all, such as foreign rental property you hold directly; and assets reported on a timely Form 3520 or 5471.
• Foreign companies: generally the base includes the value of your shares, not the company's own accounts (a disregarded entity is the exception). Any reasonable valuation method works, such as the Form 5471 balance sheet, but no discounts.
• Year-end, not maximum: the FBAR reports each account's maximum value during the year. The 5% base uses the December 31 value. Don't mix the two.
• You compute it and pay it. Form 14654 lists the penalty assets year by year, and you calculate the 5% and pay it with the tax and interest. By signing, you consent to immediate assessment, waive limitations defenses, and give up the right to seek a refund or abatement of the penalty.

Example (hypothetical numbers, to show the math): say the covered years are 2023–2025 for returns and 2020–2025 for FBARs. A green card holder living in the U.S. has a bank account A in China that was never on an FBAR and whose interest was never reported. In 2023 she also bought a bank wealth product B, likewise unreported. She also owns a rental apartment in China directly.

The highest year is 2024 at $300,000, so the penalty is $15,000. The apartment is held directly and isn't reportable on an FBAR or Form 8938, so it's left out (the rent still goes on her returns). If she had actually filed a timely FBAR and Form 8938 for 2024 and reported all the income, 2024 would count as zero, the highest year would be 2025 at $280,000, and the penalty would be $14,000.

Non-willful conduct is the entry ticket. You certify it yourself on Form 14653 or 14654, under penalties of perjury. A submission without a narrative statement of facts is treated as incomplete and gets no streamlined penalty relief. And if the statement isn't true and the IRS later finds willfulness or fraud, you could face civil fraud penalties, FBAR penalties or even a criminal referral.

The forms ask for at least the following:

• Specific reasons you didn't report the income, pay the tax or file the FBARs and information returns. For example, you didn't know the U.S. taxes worldwide income, you thought money that stayed in China and was taxed there didn't need reporting, or your preparer never asked.
• Favorable and unfavorable facts. The IRS wants "the whole story," not just the parts that help.
• Personal and financial background: education, work, when you came to the U.S., when you got a green card or became a citizen, and how you filed before.
• Source of funds for every foreign account or asset: wages from working in China, gifts from parents, an inheritance, home sale proceeds, whether you opened it while living abroad or for business.
• Your contact with the accounts: deposits, withdrawals, transfers, and who made the investment decisions.
• Any advisor you relied on: name, address, phone number and a summary of the advice.
• Spouses with different reasons on a joint certification explain each one separately.

We build the narrative from your own history, year by year, and you confirm every sentence before you sign. No templates, and nothing you didn't actually experience. If the facts point toward willfulness, we tell you the risk up front and suggest talking to an attorney about VDP rather than forcing a streamlined filing.

Deposits, wealth products, funds, brokerage accounts and cash-value insurance in China are generally FBAR accounts and may belong on Form 8938. Wealth products and funds may also be PFICs reported on Form 8621, and shares in a Chinese company may call for Form 5471. Real estate in China that you hold directly isn't reported on an FBAR or Form 8938, but rent and sale gains still go on your return.

Situations we see often:

• New immigrants and new green card holders: from the year you become a U.S. tax resident, your worldwide income and your accounts in China are reportable. Years before you became a resident, with no FBAR duty, don't need catching up.
• Long-time U.S. residents with dormant accounts in China: if the account still exists and earns interest, there's a filing duty. This is the most common SDOP case.
• Green card holders and citizens who moved back to China: as long as you hold that status, you're a U.S. tax resident taxed on worldwide income. We check your travel records year by year for a year with 330 days abroad and no U.S. abode, which may open SFOP.
• Non-citizens without a green card who went back (for example, former H-1B holders): if one of the last 3 years fails the substantial presence test, SFOP may apply. Years when you were a resident still need catching up.
• One spouse in China, one in the U.S.: on a joint return, SFOP requires both spouses to qualify, so if one doesn't, look at SDOP. FBARs are generally filed by each spouse separately; only spouses who qualify can file jointly with Form 114a.

Settle the years and the path first, then gather records, prepare the returns and FBARs, and write the non-willful statement. Finally, pay, mail the paper returns and e-file the FBARs. The slowest part is usually pulling year-by-year balances, income and transactions for every account in China.

Set the covered years, then work through seven steps; the checklist shows which form each document feeds.

① Covered years (example; depends on your actual filing date and any extension)

Item	Example years	Rule
Returns (1040 or 1040-X)	2023, 2024, 2025	The 3 most recent years whose due date (including a valid extension) has passed
FBARs	2020–2025	The 6 most recent years whose FBAR due date has passed
SFOP residency test	At least one of 2023, 2024, 2025	330 full days abroad and no U.S. abode in the same year

② Seven steps

Step	What happens
1. Eligibility	Non-willful? Any open exam or investigation? Residency test year by year; for SDOP, confirm all 3 years were filed
2. Records	Work through the checklist below, account by account and year by year
3. Returns	Original 1040s or 1040-Xs with every information return (3520, 5471, 8621, 8938 and others), marked in red on the first page
4. Certification	Form 14653 (SFOP) or 14654 (SDOP); for SDOP, list the penalty assets by year and compute the 5%
5. Pay and mail	Tax, interest (plus the 5% under SDOP) paid together, TIN on the check; paper package to the dedicated IRS Austin address
6. FBARs	E-file through BSA E-Filing, choose "Other" as the late reason and enter "Streamlined Filing Compliance Procedures"
7. Afterward	File normally every year; keep income and asset records for 3 years and FBAR account records for 6 years from the certification date

③ Document checklist

Document	Used for
Name, address, account number and year opened for each foreign account	FBAR, Form 8938, Form 14654
December 31 balance and maximum balance for each year	FBAR uses the maximum; the SDOP 5% uses year-end
Interest, dividends, wealth product income, sale records and cost basis	Unreported income, Form 8621
Business license, articles, shareholder register and financial statements of any Chinese company	Form 5471 and similar
Entry and exit records, passport stamps, U.S. housing situation	SFOP residency test
Returns you filed before	The starting point for each 1040-X
Source of funds: wages, gifts from parents, inheritance, home sale proceeds	The non-willful statement

A streamlined submission is processed like any other return. The IRS doesn't acknowledge it and there's no closing agreement. Returns aren't audited automatically, but they can be selected under the usual criteria or matched against bank and other third-party data. From then on, you file normally every year.

• Audits are still possible. If an audit finds the original returns were fraudulent or the FBAR violation was willful, the favorable terms no longer apply and heavier penalties can follow.
• The 5% can't be refunded. Signing Form 14654 waives any request for a refund or abatement of the penalty.
• Don't claim the statute ran. The certification acknowledges that some of the income you're reporting may fall outside the normal 3-year assessment period. If you later seek a refund of that tax or interest on statute grounds, you lose the streamlined terms.
• Keep the records. As the certification says, keep them for 3 or 6 years from the date you sign and provide them if the IRS asks.
• If something was miscalculated, you may get a balance-due notice or a refund. If you're not under exam, you can send corrections following the IRS instructions.

If the IRS has opened an exam, if the conduct was willful, or if no income was actually missed, streamlined is the wrong tool. Check Figure 1, then find your situation below.

• Situation A: the IRS has opened a civil exam of any year, or you're under criminal investigation. Streamlined isn't available. Not every IRS letter is an exam, so have a CPA read it before you send anything.
• Situation B: the conduct was willful. Streamlined offers no protection from criminal liability. The IRS points to the Criminal Investigation Voluntary Disclosure Practice (VDP): fax Form 14457 Part I for preclearance, then submit the full application after you get the preclearance letter. VDP penalty rules are being revised and there's no guarantee against prosecution, so talk to an attorney first.
• Situation C: all income was reported and tax paid, and only the FBARs are missing. E-file the late FBARs through FinCEN with an explanation. The IRS took down its dedicated "Delinquent FBAR Submission Procedures" page in 2026, but its internal manual (IRM 4.26.16.3.11) still says no penalty is asserted for an account when the failure wasn't willful, was due to reasonable cause, and the account is properly reported on the late FBAR.
• Situation D: all income was reported, but Forms 8938, 5471, 3520 or similar weren't filed. Use the Delinquent International Information Return Submission Procedures (DIIRSP). Forms 3520 and 3520-A are filed on their own under their instructions; other information returns are attached to an amended return, with a reasonable cause statement. Relief isn't guaranteed, and the IRS may assess a penalty during processing that you then have to answer.
• Situation E: income was missed, but one of the 3 SDOP years was never filed and you don't qualify for SFOP. SDOP can't be used, so the right approach depends on your facts. Get advice before you file anything.