If you’ve recently visited our tax law blog, you may already be familiar with the “Dirty Dozen”: an annual list, published by the IRS, highlighting the year’s most common – and costly – tax scams. Our tax defense lawyers have profiled several schemes included among the Dirty Dozen, cautioning taxpayers against scams ranging from fake Forms 1099, to “guaranteed” tax refunds obtained through illicit means (i.e. tax preparer fraud). For this article, we’re shifting focus to another scam on the IRS’ list: the willful nondisclosure of reportable offshore income or assets, a serious federal tax violation (which, as some readers may recall, also played a role in the investigation and later conviction of former Trump associate Paul Manafort). Even where such nondisclosure is non-willful, severe civil penalties can still be applied, endangering even well-intentioned taxpayers.
Fortunately, there are several ways to rectify – or, better yet, avoid – failing to disclose one’s offshore accounts. If you need help reporting foreign income or investments to the IRS this tax season, or have questions about which types of offshore assets are considered reportable, work with the international tax law attorneys at the Tax Law Office of David W. Klasing for guidance you can trust.
Failure to Disclose Offshore Income Makes IRS’ 2019 “Dirty Dozen” List of Tax Scams
The Internal Revenue Service recently updated its 2018 Dirty Dozen tax fraud list, including, in the most recent version, the practice of “hiding money or assets in unreported offshore accounts,” such as undisclosed Swiss bank accounts. When a taxpayer intentionally fails to disclose reportable foreign accounts or assets to the U.S. government, he or she risks a foreign account tax audit – or even a criminal tax investigation. The Foreign Account Tax Compliance Act (FATCA), threatens non-U.S. banks with steep penalties for failing to report American account holders, consequently, foreign financial institutions (FFIs) are highly motivated to cooperate with the U.S. government, making it virtually impossible for even the most technologically savvy of taxpayers to successfully conceal foreign assets from the IRS – which is also assisted by the U.S. Department of Justice, the Financial Crimes Enforcement Network, and dozens of law enforcement networks around the world.
What Should I Do About Undisclosed Offshore Accounts?
Despite the DOJ’s aggressive, sustained focus on offshore tax evasion, nondisclosure remains a widespread problem, as evidenced by its inclusion among the IRS’ “Dirty Dozen.” In cases where the taxpayer acted willfully, prison time is a possibility, in addition to IRS restitution and civil penalties. Non-willful violations can likewise trigger various civil penalties. The question for taxpayers is, how might this sort of scenario be avoided (or, if the willful or inadvertent nondisclosure has already occurred, be corrected)?
To report a foreign account, you may need to take some or all of the following actions, in addition to filing other forms online or via mail:
- File FinCEN Form 114, or the “FBAR” (Foreign Bank Account Report)
- File Form 8938 (Statement of Specified Foreign Financial Assets)
- Report the foreign income on Schedule B of your tax return
If you failed to disclose foreign accounts in the past, there may be several options for bringing you back into compliance, including:
- Following the IRS’ updated voluntary disclosure procedures (which override now-obsolete procedures for the Offshore Voluntary Disclosure Program, which was cancelled in 2018)
- Making a delinquent FBAR submission
- Making a streamlined disclosure
Different situations call for different approaches – and, depending on how they are handled, can lead to drastically different outcomes – making it vital to work with an experienced tax attorney who understands the pros and cons of each strategy. If you need assistance reporting foreign investments or bank accounts, choose a tax firm with a solid record of outstanding service and support for international clients and businesses worldwide.
International Tax Attorneys Can Help You File an FBAR and Report Foreign Accounts
At the Tax Law Office of David W. Klasing, our FinCEN Form 114 attorneys are dedicated to helping U.S. citizens, residents, non-residents, trusts, estates, and business entities navigate FBAR and FATCA compliance successfully. Our FBAR tax attorneys can help you determine which assets must be reported, how and where to make your disclosure, and which steps you must take in order to correct past failures to disclose. We have dedicated a substantial portion of our award-winning practice to international tax law, and excel in the efficient resolution of FATCA- and FBAR-related tax issues. Contact us online today to arrange a reduced rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295 for assistance.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
Questions and Answers about Offshore Voluntary Disclosure Programs (OVDP)
- What are the Eligibility Requirements for Streamlined Disclosure?
- Streamlined Program 2014 changes regarding foreign accounts
- 2014 changes to Tax Laws for Offshore Accounts and Assets
- Changes to IRS voluntary disclosure from 2012 and 2014 OVDP
- What is Transitional Treatment option to 2014 OVDI Program?
Questions and Answers about Offshore Voluntary Disclosure Initiative (OVDI)
- Why hire David W. Klasing to represent me in an audit
- 2011 Offshore Voluntary Disclosure Initiative FAQ
- Key Features of Initiative
- Eligibility For This Initiative
- 2011 OVDI Process
- Calculating The Offshore Penalty
- Statute of Limitations
- FBAR Questions
- Taxpayer Representatives
- Case Resolution
- What not to do!
- What to do!
- FBAR Reporting and Expired Voluntary Disclosure Program
- How the Law Offices of David W. Klasing Can Help
- Bank account overseas I didn’t report on my income tax
- Do I have to maintain information on overseas bank accounts
Questions and Answers About Foreign Tax Audits
- Does the Fifth Amendment apply to foreign accounts?
- How is evidence cultivated from foreign sources?
- How is tax loss determined?
- How might an FBAR audit be resolved?
- Is a penalty assessment ripe for judicial review?
- Overview of an administrative criminal investigation
- What is the process of an FBAR referral?
- Statute of Limitations raised during a FBAR audit?
- Precautions to be taken in the pre-audit phase
- Recent international tax and reporting prosecutions
- Foreign account, entity and investment prosecution
- Who collects restitution and penalties?
- International tax investigations are an IRS high priority
More Questions and Answers About International Tax
- A Citizenship Renunciation FAQ
- What are the Mixed Sourcing rules?
- What Actions of Foreign Persons Affect U.S. Tax Attributes?
- Foreign corporations taxed on their U.S. source income
- Possible for a Domestic Trust to Become a Foreign Trust?
- What is The Stop Tax Haven Abuse Act?
- Are there any exceptions to the mark-to-market regime?
- Can an expatriate elect to defer tax?
- Taxes on gifts and bequests to Americans from expatriates
- Generally, what are the tax consequences of expatriation?
- How foreign tax credit affects domestic or foreign losses
- Social security/Medicare taxes for self-employed abroad
- Taxes for business income earned by nonresidents
- How is Dividend Income Sourced?
- Nationality and Residency for Federal Tax Purposes
- Taxes on non-business income earned by nonresidents
- Is there a limit on availability of foreign tax credit?
- Make dual contributions for social security taxes?
- When are taxpayers obligated to taxes on foreign income
- Foreign Income and Information Reporting Filing Requirement
- Basic Rules for Sourcing Income
- What are the Basics of the Foreign Tax Credit?
- What are the basics of U.S. International Taxation?
- What are the Basic Sourcing Rules for Interest Income?
- Nexus Over Foreign Persons and Activities for U.S. Tax
- What is a controlled foreign corporation (CFC)?
- What is expatriation and how is this accomplished?
- What is the branch profits tax?
- What is the exit tax?
- Nonresident filing, withholding, and reporting requirements
- What other Source Rules Focus on the Payee’s Residence?
- Tax treaties role between the U.S. and its trade partners
- Common income issues in international tax treaties
- What Sourcing Rules Turn on an Asset’s Location?
- Tax incentives for U.S. citizens living abroad
- International Tax Q and A
- The main purpose and effect of the foreign tax credit
- Is the Foreign Tax Credit a Refundable credit?
- Difference between a foreign tax credit and a deduction
- How to claim foreign tax credit on property income taxes
- Must an individual claim the foreign tax credit?
- Why is foreign tax credit allowed?
- Statute of limitations longer when tax paid and tax accrued
- IRS re-determination of tax liability
- Difference between a Foreign and Domestic Trust?
- Foreign Trusts Subject to Outbound U.S. Taxation Rules?
- Benefit to a deferral of tax for an outbound transaction?
- What is Deferral in the Context of Outbound Transactions?
- What is involved in planning for an outbound transaction?
- What Are the Primary Concerns of Outbound U.S. Taxation?
- Basics of U.S. international taxation of a business
- Are U.S. Partners in a Foreign Partnership Taxed?
- Are U.S. Corporations Taxed on Foreign Sourced Income?
- Can Government Tax Shareholders of a Foreign Corporation?
- What is a Controlled Foreign Corporation (CFC)?
- Constructive Ownership Rules for Foreign Corporation
- US Shareholders Taxed on Distributive Share of CFC Income
- What are the Two Main Categories of Subpart F Income?
- Investing in Controlled Foreign Corporation
- Subpart F Income Requires Separate Computations
- What is the Foreign Tax Credit (FTC)?
- What is the “Deemed Paid” Foreign Tax Credit?
