Taxpayers are increasingly aware that of foreign account disclosure obligations. Since at least the late 2000s, the IRS has devoted significant resources towards educating taxpayers that secret offshore accounts are not acceptable and can result in significant legal liability. In most circumstances, taxpayers will face monetary penalties and fines. However, in certain circumstances where it appears the noncompliance was voluntary or intentional, a taxpayer can face criminal tax penalties that carry a potential federal prison sentence.
While the IRS is cracking down on concealed foreign accountant foreign income, taxpayers do still have options to mitigate the consequences they can face. Standard Offshore Voluntary Disclosure Program (OVDP) and Streamlined Disclosure can reduce the penalties owed and in some cases, eliminate offshore penalties. The Tax Lawyers of the Tax Law Offices of David W. Klasing can help you get a handle on FBAR, FATCA, and other international tax obligations before the IRS or Department of Justice pursue an enforcement action.
Taxpayers are generally required to file FBAR when the aggregate balance of covered foreign accounts exceeds $10,000. Generally, this obligation is satisfied by filing FinCEN Form 114 through the Bank Secrecy Act web portal.
This obligation was traditionally due on June 30, however, 2017 was the first filing season where the obligation was moved up to align with Tax Day. Therefore, in 2017, the FBAR was required to be filed on or by April 18. In future years, the FBAR filing deadline will continue to align with the tax filing deadline.
Taxpayers may have missed the filing deadline because they became accustomed to the old June FBAR deadline. While an extension for FBAR was not available in the past, it is available for the first time in 2017. In fact, likely due to the new filing deadline, FinCEN announced that all taxpayers have an extension of time to file FBAR. The extended FBAR filing deadline is October 16, 2017. Taxpayers do not need to request an extension but should allow ample time to assess financial documents and records and file FBAR.
Even inadvertent failures to file FBAR can be punished with a fine of up to $10,000. The fine can be imposed for every year the FBAR obligation existed but was not satisfied.
FATCA is a relatively new foreign disclosure obligation passed by Congress in 2010. Under FATCA, taxpayers are also required to make independent foreign account disclosures when their foreign assets exceed certain levels. There is no single filing threshold for FATCA and taxpayers who are married filing taxes jointly and living abroad can hold significantly more assets before they are required to disclose.
The FATCA obligation is satisfied by filing IRS Form 8968. This form should be filed at the same time the taxpayer’s tax return is filed. If the taxpayer fails to file FATCA, significant penalties are possible. In fact, continued noncompliance can trigger additional $10,000 penalties.
If you suspect that you made errors regarding account disclosures, you can take steps to minimize the impact these mistakes can have on your finances and life. For taxpayers who are concerned that IRS agents may view their actions as “willful,” the OVDP program can reduce potential offshore fines while also providing some assurance against criminal prosecution. If willfulness is not a concern, the Streamlined Disclosure Program may be more appropriate. Under the Streamlined Disclosure Program, taxpayers can pay a significantly reduced or no offshore penalty and face less rigorous filing requirements. However, the Streamlined Program will not protect against potential criminal tax prosecutions.
Therefore it is essential for taxpayers to seek the guidance of a tax lawyer before taking any action on a standard or streamlined disclosure. Mistakes made during the disclosure process can have the effect of turning over evidence to the government regarding potential reporting noncompliance and crimes.
If you are concerned that mistakes made regarding FBAR or FATCA will come back and trigger significant penalties and potential criminal liability, the tax lawyers of the Tax Law Offices of David W. Klasing may be able to help. When you come to our office as a client, you can rest assured that the disclosures you make will be protected due to the attorney-client privilege. In fact, if willfulness is a concern in your matter it is important that you only speak to a tax lawyer.
To schedule a confidential, reduced rate consultation with the tax lawyers of the Tax Law Offices of David W. Klasing, please call 800-681-1295. We have locations conveniently located in Los Angeles and in Irvine.