Form 14654 Instructions: How to Prepare the Streamlined Domestic Certification

Form 14654 is the certification used by eligible taxpayers submitting under the Streamlined Domestic Offshore Procedures. It calculates the miscellaneous offshore penalty and requires a signed, factual explanation of why the taxpayer’s failures were non-willful. The domestic procedure can also apply to a taxpayer who is physically abroad but does not satisfy the IRS non-residency requirement for the foreign procedure.

Confirm the procedure before completing the form

Form 14654 is for the domestic streamlined procedure. A taxpayer who satisfies the foreign-residency requirements generally uses Form 14653 instead. The choice affects eligibility and penalties, so determine residence status and review possible willfulness concerns before preparing the certification.

Part I: taxpayer information

Enter the taxpayer’s identifying and contact information exactly as it appears on the covered returns. Joint filers should confirm that both spouses qualify and understand the certification. If their reasons for noncompliance differ, the narrative should explain each spouse’s facts separately.

Part II: the covered returns and tax

List the three most recent tax years for which the U.S. return due date, including a properly requested extension, has passed. The domestic eligibility rules require the taxpayer to have previously filed a U.S. tax return, when required, for each covered year. The package generally includes complete and accurate amended returns for those years, together with all required international information returns. Reconcile the additional tax and statutory interest to the amended returns and payment.

Part III: the miscellaneous offshore penalty

The Title 26 miscellaneous offshore penalty is generally five percent of the highest aggregate year-end value of foreign financial assets in the covered penalty years. The penalty base is not limited to FBAR accounts. Depending on the facts, it can include assets reportable on Form 8938 and certain interests in foreign entities or trusts.

1. Identify every potentially covered foreign financial asset.
2. Determine the year-end value for each penalty year.
3. Convert foreign currency using the required year-end exchange rate.
4. Document ownership, joint ownership, and any duplicate reporting.
5. Total the covered assets by year.
6. Select the highest aggregate year-end balance and calculate five percent.

Keep a schedule showing the source statement, currency, exchange rate, ownership percentage, U.S.-dollar value, and reason each asset is included or excluded.

Part IV: the non-willful statement

The narrative should explain the complete compliance failure: unreported income, unpaid tax, missing information returns, and missing FBARs. Describe the taxpayer’s background, residence history, account purpose, source of funds, prior return preparation, understanding of U.S. rules, discovery of the problem, and corrective actions. Address facts that may appear inconsistent with inadvertence or mistake.

Generic statements such as “I did not know” do not explain why the misunderstanding occurred. The statement should be specific enough to match the account history, filed forms, correspondence, and advice received.

Review before signing

• Confirm every account and asset appears consistently across the returns, Forms 8938, FBARs, and penalty schedule.
• Match income to the correct year and owner.
• Check that the narrative covers every failure being corrected.
• Explain professional advice accurately and preserve supporting records.
• Verify the tax, interest, and penalty payment.
• Do not sign until the complete package has been reviewed.

Official IRS sources

• Streamlined filing compliance procedures
• U.S. taxpayers residing in the United States: domestic streamlined procedures
• Streamlined Domestic Offshore Procedures FAQs
• Form 14654 certification for U.S. residents

This article provides general information and is not legal or tax advice. The correct compliance option depends on the complete facts.