If the United States were a person, do you ever wonder what they may daydream about? What would the world look like if the U.S. could have everything their way? Well, for international tax purposes, it is conceivable that they would want full disclosure of all American-owned accounts overseas, regardless of the country that they are in. Unfortunately for U.S. taxpayers, the U.S. wouldn’t have to dream that sort of scenario up, it is already happening.
Lithuania and U.S. to Share Account Information in New Model 1 IGA
Last month, Lithuania became the latest country to enter into an inter-governmental agreement with the United States. Over the past few years, the list of participating nations has grown astronomically. With the addition of Lithuania, the number of participating countries and jurisdictions exceeds 100. The list is comprised of countries that have signed agreements and countries that have come to agreements in substance.
The agreement between the U.S. and Lithuania is a Model 1 IGA, which involves the reciprocal sharing of account information between the United States and Lithuania regarding each country’s respective citizens and the assets that they hold overseas. Following the agreement, each country will put in place systems that will automatically share such information with each other.
The other type of agreement, the Model 2 IGA, would require the non-U.S. nation to provide information about Americans and their accounts in the foreign country but does not require that the United States also send the foreign country the same type of information. As you may have guessed, most of the participating nations use the Model 1 agreement.
This ever-popular information-sharing trend isn’t simply trying to help feed the IRS’ hunger for information on Americans. Rather, the goal of the agreements is to provide the IRS and their Criminal Investigation Division with evidence to prosecute and convict U.S. taxpayers for holding assets in accounts overseas and not declaring them to the IRS through an FBAR, which is required by law for any account in excess of $10,000 at any point during the taxable year. Violators who are found to have willfully failed to file an FBAR face lengthy federal prison sentences and hefty penalties that could very well exceed double or triple the amount of the highest account balance.
Disclose Your Account with the 2014 OVDP Before It’s Too Late
In the past, we have featured stories about several Americans that have been investigated, convicted and sentenced to federal prison because of their failure to disclose their accounts to U.S. authorities. You don’t have to be the next one of them. In an effort to help taxpayers come into compliance, the federal government has, for a limited time, set up the Offshore Voluntary Disclosure Program. Participation in this program will protect you from criminal prosecution and could reduce the amount of fines and penalties that you face.
Though the OVDP is a great resource for many taxpayers, there are a few important things to keep in mind. First, you must act quickly. The OVDP can only help you if you enter the program before the government has received word from another government about your account. If they have already started to build a case against you, participation in the program will likely not protect you. Second, you need an experienced tax attorney to help walk you through the intricacies of the program. Because the terms can change at any time, it is important to have representation that is on top of the current developments in the law regarding the program.
The tax professionals at the Tax Law Offices of David W. Klasing have years of experience in assisting taxpayers avoid the potentially harsh penalties and criminal charges associated with having undeclared offshore accounts. There are no signs of the IGA’s letting up, like the one that Lithuania entered into recently. If you have an offshore account that is undeclared, it is only a matter of time until the foreign country or the bank turn on you and subject you to a full criminal investigation. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
