While the U.S. tax code is complicated enough on its own, it becomes even more difficult to remain perfectly in compliance when you have assets in foreign countries. Some people choose to keep money in offshore accounts and fail to disclose these assets to the IRS. Whether this is done unintentionally due to ignorance of the law or intentionally to try to avoid paying taxes, it is important to bring yourself into compliance in order to avoid harsh penalties. The IRS has been vocal about its intent to find and prosecute those with offshore accounts who are not in compliance with U.S. tax laws.
Two Ways to Resolve Offshore Account Issues
If you have an offshore account and have not been reporting income or disclosing the account to the IRS, you may face significant penalties. Willful civil violations can result in penalties equal to the greater of $100,000 or 50% of the balance of the account for each violation. In some cases, this has meant that the penalties have actually exceeded the offshore account balance. In addition, some people failing to report offshore accounts could even face jail time.
The good news for taxpayers is that there may be various options for bringing themselves into compliance rather than waiting for the IRS to come knocking. The following are two examples:
- Participate in the Offshore Voluntary Disclosure Program. This program offers taxpayers with undisclosed income from offshore accounts an opportunity to get themselves current with their tax returns and information reporting. Participants voluntarily disclose foreign accounts instead of remaining silent and risking later detection by the IRS. By participating in the program, taxpayers receive less severe penalties. The OVDP began in 2009, and more than 54,000 disclosures have since been issued.
- Make use of streamlined procedures. This option was initiated in 2012 and was further expanded in 2014. Streamlined procedures allow a wider group of U.S. taxpayers who have unreported foreign financial accounts to disclose their information to the IRS and avoid harsher penalties. These procedures are designed to help taxpayers who do not meet the requirements of the OVDP. The procedures have been utilized by more than 30,000 taxpayers to bring themselves back into compliance with U.S. tax laws.
While tax problems can feel overwhelming, we are here to help lessen the burden. Learn more about the experiences of our past clients by checking out our client testimonials today.