The following is related to the subject of foreign bank accounts and other offshore assets. As you may know, the IRS and other parts of the U.S. Government have devoted considerable effort to locating undeclared foreign bank accounts and other offshore assets. The recent Foreign Account Tax Compliance Act (FATCA) will result in the continued disclosure by foreign financial institutions and by other foreign intermediaries of U.S. taxpayers with foreign accounts and other offshore assets. Compliance enforcement has resulted in large amounts of tax and penalties being collected by the U.S. Treasury. In general, if the IRS finds a taxpayer who is not in compliance, the penalties imposed will be extremely high. There have been taxpayers whose penalties have exceeded the current value of their foreign assets. On the other hand, taxpayers who voluntarily come into compliance with the relevant rules will face much lower penalties.
The rules in this area are complex and voluminous. If you are trying to evaluate whether you have a foreign account or offshore asset that should be reported to the IRS or U.S. Treasury, the default answer should be “yes.” Note: Regardless of whether a foreign account or offshore asset produces income, the U.S. Government most likely wants to know about it as there are rules that require the reporting of the mere existence of foreign bank accounts and other offshore assets. There are exceptions to reporting, but they are limited.
David Melone, one of our Tax Principals, is available to you to discuss any matters of concern or questions that you might have. He can help you evaluate compliance requirements with respect to foreign accounts and other offshore assets. In addition, if appropriate, he can help you evaluate the application of the IRS’s Offshore Voluntary Disclosure Program (OVDP). The IRS’s OVDP offers significant relief opportunities for taxpayers who have failed to file required forms and/or failed to declare and pay tax on foreign income. This program is designed to help taxpayers come into compliance voluntarily and can be utilized only if the IRS has not previously contacted the taxpayer about potential non-compliance.