Get Your Offshore Account Voluntary Disclosures Resolved Before Year End
If you are one of the thousands of American taxpayers with offshore financial accounts, the idea of not being in compliance with IRS reporting requirements may make your hair stand on end. You don't have to live in fear of an audit. Find out how to disclose your offshore accounts before the end of the 2016 fiscal year, so that you can start 2017 off right.
Foreign Reporting Agreements Make Non-Disclosure Risky
On October 21, 2016, the Internal Revenue Service (IRS) issued a statement urging U.S. taxpayers to voluntarily disclose their offshore financial accounts. While nothing has changed in the way the reporting laws work, recent international agreements have made it easier for the IRS to detect when foreign accounts go unreported. Last year, the Foreign Account Tax Compliance Act (FACTA) and a network of inter-governmental agreements between the U.S. and other partnering countries created automatic third-party account reporting. The IRS is also obtaining information on undisclosed offshore accounts from the Department of Justice's Swiss Bank Program and several non-prosecution agreements with participating banks.
That means that even if you don't report your offshore accounts, your bank or financial institution might. With all that information coming in to the IRS, choosing not to disclose could put you at risk for more severe penalties, and even criminal prosecution. But the news isn't all bad. The IRS has provided two methods for you to get into compliance before year end.
Offshore Voluntary Disclosure Program
The Offshore Voluntary Disclosure Program (OVDP) allows U.S. taxpayers with undisclosed income or assets from foreign financial accounts to update and amend their tax returns and information reporting obligations. While the OVDP still requires you to pay any outstanding tax obligations, interest and penalties, it can help you avoid thousands of dollars in future penalties, and even criminal prosecution later on.
Streamlined Filing Compliance Procedures
If your failure to report foreign assets or income was non-willful, the Streamlined Filing Compliance Procedures (SFCP) can be even more helpful. This procedure will allow you to file necessary back tax returns and Reports of Foreign Bank & Financial Accounts (FBARs). Once again, you will be expected to pay the outstanding taxes and interest. However, taking advantage of the SFCP can substantially reduce your penalties, sometimes even cutting them to a single year.
Thousands of Taxpayers Use Voluntary Compliance Procedures
Some taxpayers may worry that voluntarily disclosing their offshore income and assets may single them out for closer scrutiny in the future. You will hardly be alone. Since 2009, the IRS reports 55,800 people have used OVDP to resolve their tax obligations, which totaled more than $9.9 billion in taxes, penalties, and interest. Another 48,000 taxpayers have used the SFCP to correct non-willful omissions in their disclosures. All together, SFCP has resulted in 96,000 delinquent and amended tax returns and approximately $450 million paid in taxes, penalties, and interest. IRS Commissioner John Koskinen said in the statement:
The IRS has passed several major milestones in our offshore efforts, collecting a combined $10 billion with 100,000 taxpayers coming back into compliance. ... As we continue to receive more information on foreign accounts, people’s ability to avoid detection becomes harder and harder. The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.
You don't have to go into 2017 worrying if this will be the year the IRS finds you. An experienced tax attorney can help you file the necessary voluntarily disclosures to right your financial ship and make sure you have met all of your tax obligations.
Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years experience. If you have questions regarding the OVDP or SFCP processes, contact Joe Viola to schedule a consultation.
