Can the IRS Reject a Streamlined Filing Submission?

2025-08-12 11:56:39

Submitting a Streamlined Filing to the IRS doesn't guarantee approval. Learn why the IRS might reject your SFCP application and how to avoid common mistakes.

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When you’re behind on foreign account reporting, the IRS Streamlined Filing Compliance Procedures (SFCP) can feel like a lifeline — especially for U.S. expats. But here’s a question many don’t ask until it’s too late: can the IRS actually reject a streamlined filing? The short answer is yes. And as the Jones case makes clear, rejection often comes down to missing information or signs that your mistake may not have been as innocent as you thought.

Let’s unpack how the Streamlined Filing program works, where people go wrong, and how you can keep your submission from ending up in the reject pile.

What Is the Streamlined Filing Compliance Program?

The IRS launched the SFCP to help taxpayers who didn’t realize they needed to report their foreign accounts — and want to fix it before the IRS comes knocking. It’s primarily for people who:

• Failed to file FBARs or foreign income tax forms
  
  

• Had no criminal intent or intent to hide money
  
  

• Are now ready to disclose everything honestly
  
  

If your noncompliance was truly non-willful, the program offers a lighter penalty and the chance to get back in good standing. Sounds fair, right?

But the program comes with strict requirements — and skipping steps can quickly land you outside its protections.

Why Would the IRS Reject a Streamlined Submission?

The IRS doesn’t automatically accept every SFCP filing. You must prove that your past mistakes were non-willful and that your current submission is thorough and accurate.

Common reasons for rejection include:

• Incomplete disclosures: Forgetting even one account could be seen as dishonest, even if it was unintentional.
  
  

• Missing narrative: A key part of SFCP is the written explanation of why you didn’t file correctly. If that explanation is vague or inconsistent, it raises red flags.
  
  

• Inaccurate income reporting: Leaving out foreign interest or investment income can look like an attempt to hide funds.
  
  

• Inconsistent stories: If the IRS finds contradictions in your filing history, your SFCP application may be dismissed.
  
  

The Jones Case: A Real-World Warning

In the Jones v. United States case, a widow tried to correct past foreign reporting issues after her husband passed away. She submitted under the Streamlined Filing program, believing she’d included everything. But she missed a few of her husband’s New Zealand accounts.

That omission triggered IRS suspicion.

Although she claimed the mistake was non-willful, the IRS argued otherwise. Her submission was scrutinized and the court ended up ordering a full trial to decide whether her failure was negligent or intentional.

This case highlights a tough truth: even an honest mistake can derail your submission if the IRS thinks you knew more than you admitted.

How the IRS Determines Willfulness

When evaluating SFCP filings, the IRS looks at intent — was your failure to report truly accidental?

Signs that might suggest willfulness include:

• Prior warnings from the IRS
  
  

• Professional background (e.g., being a finance expert)
  
  

• Holding accounts in known tax havens
  
  

• Previously filed partial disclosures
  
  

• Attempts to conceal or shift assets before filing
  
  

Remember, the IRS has access to global banking data through FATCA agreements. If they find accounts you didn’t mention, your credibility takes a hit.

How to Avoid Rejection When Using SFCP

If you’re considering a streamlined filing, here are a few smart steps to reduce risk:

1. Compile everything — and double check it

Include all foreign financial accounts: bank, retirement, brokerage, pension, and even accounts you barely use. Don’t rely on memory — check your records thoroughly.

2. Tell your story clearly

Your personal narrative is key. Be honest, and explain why you didn’t file properly in the past. Avoid canned answers — make it personal and believable.

3. Pay all owed taxes

If your unreported income triggered U.S. tax liability, pay it with the submission. Unpaid tax weakens your case for good faith compliance.

4. Work with a specialist

An expat tax professional can catch things you might miss. Given the consequences of a rejected submission, professional help is worth the cost.

5. Don’t hedge your bets

Submitting a half-truth to “test the waters” is a fast way to get rejected. The IRS treats partial compliance harshly — it’s all or nothing.

What Happens If Your Submission Is Rejected?

If the IRS rejects your SFCP filing, you’re no longer protected by the program. That means:

• You could be subject to the full FBAR penalties (up to 50% of each undisclosed account)
  
  

• You might face further audits or investigations
  
  

• You lose the opportunity to resolve issues quietly and may need legal representation
  
  

It’s a high-stakes gamble. Once the IRS rejects a submission, you can’t just fix it and resubmit — at that point, you're under examination.

So Is Streamlined Filing Still Worth It?

Yes — absolutely, if you qualify. Thousands of expats have used it successfully to clean up old tax issues and move forward. But it only works if:

• You genuinely didn’t know you had to file
  
  

• You come clean about every account and every dollar
  
  

• You make a strong, truthful case that your mistake was non-willful
  
  

If you can’t meet those standards, there may be other compliance options to consider, such as the IRS Criminal Investigation Voluntary Disclosure Program — but those come with stricter requirements and more scrutiny.

Final Thoughts: Honesty and Accuracy Are Everything

The Streamlined Filing Compliance Procedures offer a real second chance. But they aren’t a loophole or a get-out-of-jail-free card. Submitting a half-baked or misleading disclosure can backfire badly.

The lesson from Jones and similar cases is simple: do it right the first time. Get professional help, gather your full account history, write your story clearly, and don’t leave anything out.

If you’re upfront and thorough, SFCP can save you from harsh penalties and years of stress. But if you treat it casually or try to cut corners, the IRS has every right to show you the door.

M.Daniyal