The Foreign Account Tax Compliance Act has struck fear in Americans that have undeclared foreign bank accounts. Federal authorities have been working diligently with foreign countries to establish and enforce agreements that will and have been seeing American account information being sent from overseas, directly into the government’s hands. A recently-released IRS announcement has put a deadline on FATCA compliance in foreign countries that have entered into agreements with the US. This news will likely create a sense of panic in residents that have a secret bank account overseas. Those residents should contact an experienced tax attorney as soon as possible.
In IRS Announcement 2016-27, the Service announced that foreign countries that have entered into an Intergovernmental Agreement (IGA) with the United States will have until the end of the year to come up with a plan as to how sensitive American account information will be transmitted from foreign banks to the IRS. While FATCA is already in effect, those nations that have an IGA in place are considered to be in compliance while an information dissemination process is worked out. This announcement evidences that the US is losing its patience as it states that banks in those nations that have not complied will not be in compliance with FATCA as the IGA’s with the foreign nations will no longer be in effect.
FATCA requires foreign banks to disclose identifying account information of Americans to the IRS. Although the banks can directly send the required information to the IRS, many nations have entered into IGA’s with the US, which involve the mutual sharing of information between the two countries. According to the terms of many of the IGA’s, foreign banks will send American account information to the domestic taxing authority in that country, who will then transmit the information to the US.
Apparently, the determination as to how account information will be disseminated to the foreign government’s taxing authority has been a lengthy one. The US was quick to set up the Information Data Exchange Service (the IDES) whereby foreign banks or governments can transmit American bank account information. The IRS announcement will light a fire beneath foreign countries and their banks to develop protocols for the transmittal of account information.
Foreign Bank Account Reporting (FBAR) laws require that US residents report on the existence of any foreign bank account that has or has had a high balance of more than $10,000 in the tax year. Taxpayers who willfully fail to declare foreign bank accounts subject to FBAR face hefty penalties and potential federal prison time. The IRS and Department of Justice have not elaborated as to the definition of “willful”, which does not give residents any indication as to whether their actions are felonious.
The IRS has established an administrative program that allows taxpayers to come forward and declare their foreign bank account in exchange for the promise not to be prosecuted. The Offshore Voluntary Disclosure Program (OVDP) has allowed thousands of US residents to avoid the possibility of prison time. Not everyone qualifies for the program and as is true with many government programs, it isn’t right for everyone. An experienced tax attorney will be able to assist a resident in determining whether the OVDP is beneficial for them or if another strategy should be employed.
The OVDP has a drawback: it is time-sensitive. Because participating in the OVDP is not a right, the IRS can discontinue it or change its terms at any time. Further, if the IRS or Department of Justice are investigating you for any tax-related matter, you may not be eligible to participate. Thus, time is of the essence, especially considering the growing impatience that the IRS has developed with foreign country’s IGA/FATCA implementation timing. Consulting with an experienced tax attorney will help ensure that you are taking the appropriate steps to avoid a criminal prosecution or conviction for failing to declare you foreign bank account.
Contact an Experienced Tax Attorney Today
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have assisted taxpayers in a plethora of different situations, including FBAR compliance and OVDP participation. Although many taxpayers initially believe that they can handle their situation on their own, the assistance of an experienced tax lawyer can make or break a taxpayer’s financial and physical freedom. Many times, taxpayers don’t realize that professional assistance by a lawyer is needed until they have already handed over incriminating documentation or made statements that can be used against them in criminal proceedings. There is no reason that you should lose sleep at night because of a tax problem. Our team of professionals is ready to zealously advocate for your best interests. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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