When it comes to the future of taxation in the United States, the only certainty is uncertainty. While most of the attention given to tax reform has been directed at the corporate tax rate, mandatory repatriation, or the debate between territorial vs. worldwide taxation, some GOP lawmakers have indicated that they would like to see the Foreign Account Tax Compliance Act (FATCA) repealed. But U.S. residents shouldn’t forget about the government crackdown on undeclared foreign bank accounts.
Foreign Bank Account Reporting (FBAR) laws require U.S. residents with foreign bank accounts with a high-balance of $10,000 or more at any point in the tax year to report the existence of such account to the federal government. The willful failure to comply with FBAR laws can land you in federal prison for up to five years for each year that the bank account went undeclared. Additionally, willful FBAR violators are subject to a penalty of 50-percent of the high-balance in the undeclared account for each year the account went undeclared.
FATCA, a product of the Obama administration, goes after foreign banks that have U.S. customers. The law, which has been heavily criticized by many Republican lawmakers, imposes a reporting requirement on foreign financial institutions. FATCA requires the transmission of account information of anyone with a foreign bank account to the federal government. Banks that fail to comply with FATCA are subject to a 30-percent withholding on any funds transferred by a US payor. Such financial sanctions would place an undue burden on the bottom line of financial institutions. Needless to say, foreign banks and governments have lined up to cooperate.
Many politicians, banks, and other special interest groups have expressed their hopes that a FATCA repeal will make its way into Trump’s comprehensive tax reform. Treasury Secretary Steven Mnuchin made the bold assertion that tax reform, and whatever that may come along with it, will be completed by the time that Congress recesses in August.
The news of the potential doing-away with FATCA shouldn’t encourage U.S. residents to hide their money overseas without fear of repercussion. FATCA is still good law and there is no guarantee that opponents of the law can muster enough support to repeal it. It is estimated that between 30 and 70 billion dollars of tax revenue have been lost to undeclared offshore bank accounts and is thus an enforcement priority. The IRS and Department of Justice is actively going after those who have undeclared foreign bank accounts.
Those with foreign bank accounts that have not yet filed a FinCEN 114 disclosure should consider their options to come into compliance with FBAR laws. The Offshore Voluntary Disclosure Program (OVDP) allows taxpayers to come forward, provide details about their foreign bank account, and pay a reduced penalty, interest, and any back-taxes in exchange for an agreement that the Department of Justice will not levy criminal charges against you. Although the OVDP exists today, there is no guarantee that it will, going forward. Also, if you are already being investigated by the IRS for any reason, your ability to participate in the OVDP may be limited. Thus, it is in your best interest to contact an experienced tax attorney as soon as possible to discuss your options.
Contact an Experienced Tax Attorney Today
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting clients with FBAR and FATCA compliance. The OVDP is just one tool in the tool chest of our zealous tax advocates. Streamlined Voluntary Disclosures are another. Don’t lose another night of sleep over your undeclared foreign bank account. Contact the Tax Law Offices of David W. Klasing or schedule online for a reduced-rate initial consultation.
Here is a link to our YouTube channel: Click Here.
Here is a link to our practice overview video on foreign income and information non-compliance.
