Most middle-aged Americans can remember a time where it was possible to open an account in a foreign country and deposit as much money as desired without attracting much attention. In fact, communication between nations until recently was relatively non-existent. Over the last decade, American tax and law enforcement agencies have taken significant steps in making the world a more connected place, when it comes to communicating foreign account information. The goal of all of this information sharing: to discover those with concealed bank accounts and to catch those who are evading taxes on a worldwide basis. Tax fraud lawyers are paying close attention to this issue.
Seychelles Agrees to Share Tax Information
Though the United States has been leading the charge, European nations have caught on and have made huge improvements in the way that they share tax and other financial information with each other. The African island nation of Seychelles is the latest country to commit to European calls for the free sharing of information between G-5 and other nations.
Seychelles has been on the radar of G-5 nations in the past. Having been considered a tax haven for several years, the Organization for Economic Cooperation and Development (OECD) praised Seychelles for their tax transparency policies in 2013. Though the goodwill toward the nation didn’t last long as the OECD criticized the nation because it hadn’t followed through on their plans to support the free exchange of information of accounts located in Seychelles. The new agreement will add the African nation to a larger list of countries who are willing to automatically share financial and tax information with each other.
The agreements that are being brokered in Europe are separate from the Foreign Account Tax Compliance Act and FBAR laws that require U.S. taxpayers to disclose to the government any foreign account in excess of $10,000 at any point during the taxable year and also requires foreign institutions to report to U.S. authorities any account-holders from the U.S. with balances of $10,000 ore more. Many foreign banks have reluctantly agreed to participate in the disclosure of information due to certain withholding repercussions if they do not comply. If you’re concerned about these repercussions, consult with an FBAR attorney right away.
Avoid Jail Time with the 2014 OVDP
Both of the efforts by U.S. and European authorities should be of great concern to American taxpayers who have offshore accounts. There are really two forces working against such taxpayers: foreign nations entering into legal agreements to share information and private banking institutions voluntarily handing over account information to the IRS. In both situations, a huge stream of information is now being funneled directly into the offices of the IRS, who then turn around and open IRS criminal investigations against U.S. taxpayers.
Taxpayers who do not disclose their foreign accounts are faced with severe penalties if they are caught. In addition to the possibility of federal prison time, willful failure to disclose your account will produce a penalty equal to 50% of the account balance for each year that you failed to report such account. This means that the penalty associated with the non-disclosure could easily exceed 250% of the amount of the highest balance of the account.
There is one option that will keep you out of jail and could keep your penalties as low as possible. The IRS recently changed the terms of its Offshore Voluntary Disclosure Program to make it more appealing for taxpayers to voluntarily disclose their accounts and pay a reduced penalty and any taxes owed. Though the program is not intended to be complicated, it is not advisable to go through it without an experienced tax attorney. Also, if the government finds out about your account before you have entered the program, you are disqualified and will be at the mercy of the court system, which is a gamble that some federal prisoners wish they wouldn’t have made.
If you are a U.S. taxpayer with a foreign account overseas understand that time is of the essence and that you need to speak to a tax attorney that can help you navigate the sometimes-difficult OVDP. The experienced tax professionals at the Tax Law Offices of David W. Klasing have years of experience in helping taxpayers successfully reduce their penalties, fines and tax liabilities and keeping our clients out of prison. At the Tax Law Offices of David W. Klasing, we are here to help and you and your freedom are our top priority. Call us today at (800) 681-1295 for a reduced-rate consultation.
