As our world and its economy become more and more globally connected, it has become increasingly common for American taxpayers to hold money and other investment and business assets in foreign countries often utilizing offshore bank or financial accounts & offshore business entities. Many people are unaware of the additional U.S. income tax and information reporting requirements that come with holding business or investment assets overseas rather as opposed to the often-familiar domestic income tax and information reporting requirements. Furthermore, there may also be reporting requirements to the tax authority of the nation in which the assets are located. Failure to make proper U.S. foreign source income tax and foreign information reporting as required by law can lead to serious and often draconian civil fines, criminal tax evasion and foreign information reporting failure prosecution in egregious cases where there was willful noncompliance.
Much of the ability of the IRS and foreign tax authorities to enforce these laws, however, comes from international tax treaties involving information sharing agreements between the U.S. and foreign counties to share taxpayer data and information about who holds accounts in domestic and foreign banks and financial institutions. The experienced dual licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing have been closely following the ratification of a deal between the U.S. and Singapore regarding the sharing of information under FATCA, a U.S. law which targets non-compliance with tax laws by U.S. taxpayers using overseas accounts.
The Foreign Account Tax Compliance Act, or FATCA, requires that U.S. taxpayers with a certain amount of assets in foreign or offshore bank or financial accounts report their foreign holdings to the IRS each year. The form where this must be reported if you meet the qualifying levels is called Form 8938. This can be a complicated process and should not be done without first consulting with an experienced dual licensed Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing.
The qualifying levels for FATCA largely depend on which marital status you claim on your returns. The threshold amounts are raised for foreign residents, however. If you are married filing separate income tax returns, the thresholds are $50,000 or more on the last day of the tax year or more than $75,000 at any time during the tax year. For married persons filing jointly, you must report under FATCA if you have $100,000 in offshore assets on the last day of the year or $150,000 at any time during the year. For unmarried persons, you must report if you have $50,000 in offshore assets on the last day of the year or $75,000 at any time during the year.
Because FATCA by its nature involves investigations into holdings in foreign bank and financial accounts, successful implementation of its provisions requires cooperation with foreign tax and regulatory authorities. As such, the U.S. commonly makes deals and treaties with other nations regarding FATCA enforcement. This is especially vital in financial and banking centers like Singapore. The U.S. and Singapore first came to a non-reciprocal agreement called The Singapore-US Foreign Account Tax Compliance Act (FATCA) Model 1 Intergovernmental Agreement (IGA) and Regulations, which was entered into force on 18 March 2015. This created a streamlined process for Singaporean financial institutions to share information with the IRS and other American institutions to facilitate compliance with FATCA by American taxpayers with Singaporean bank or financial accounts.
On 13 November 2018, the U.S. and Singapore signed a new version of the Intergovernmental Agreement (IGA). On August 8, 2020, Singapore’s tax ministry ratified the agreement and it set to go into effect and supersede the prior IGA on January 1, 2021. The biggest difference in the new version is that it is now a reciprocal agreement. This means that now, in addition to Singaporean financial institutions sharing information regarding potential FATCA violations with the U.S., some U.S. financial institutions will also be required to share information relating to certain financial accounts held by Singapore residents.
As such, the new rules generally only affect reporting institutions like banks, rather than individual taxpayers. However, many U.S. taxpayers with assets in Singaporean bank or financial accounts may be unaware of their reporting requirements under FATCA and the existing IGA that has created a close working relationship between U.S. tax authorities and South Korean banks and financial institutions. If you are a taxpayer who has not properly reported under FATCA, there are ways to bring you back into compliance, including potentially amending your tax returns or filing for a voluntary disclosure program. If you believe this might benefit you, reach out to our skilled dual tax attorneys and CPAs at the Tax Law Offices of David W. Klasing so we can take a look at the particulars of your situation and give you the most accurate, up-to-date advice.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
Other Types of Offshore Voluntary Disclosure Programs
Under the reciprocal Intergovernmental Agreement (IGA) between South Korea and the U.S., financial institutions in both countries are required to share information with tax authorities regarding potential violations of FATCA. Due to the close nature of this relationship, this is an area where FATCA violations are often caught and charged. As such, if you believe that you may not have made accurate or complete FATCA reports regarding bank accounts in Singapore or another foreign nation, you should reach out to a skilled dual licensed Tax Lawyer and CPA like those at the Tax Law Offices of David W. Klasing right away to try to mitigate any damage that has already been done. To set up a consultation, call us today at (800) 681-1295.
Questions and Answers About Foreign Tax Audits
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