New Streamlined Compliance Program
On June 18, 2014 the IRS announced a new program that allows foreign account holders to avoid criminal charges and limit their tax penalties to 5% provided their failure to comply with foreign tax reporting rules was not willful. For more on this exciting new program, go to Streamlined Compliance Program.
Offshore Voluntary Disclosure Initiative (OVDI)
The Internal Revenue Service (IRS) has announced the indefinite continuation of an IRS amnesty program called Offshore Voluntary Disclosure Initiative (OVDI).
The program is available for taxpayers with unreported foreign financial accounts, entities, or income.
The OVDI limits the IRS penalties associated with the failure to disclose foreign accounts, foreign assets, and foreign income. The OVDI also limits the exposure of taxpayers with undisclosed offshore accounts and assets to civil penalties.
If you do not participate in the OVDI program and are discovered with unreported foreign bank accounts, unreported foreign income, and certain undisclosed foreign assets you will be subject to IRS criminal prosecution and the following extremely harsh IRS penalties:
- Failure to report a foreign account. This IRS penalty is the greater of $100,000 or 50 percent of the total balance of a foreign account for each year held.
- An IRS fraud penalty equal to 75 percent of any unpaid tax
- IRS Penalties for the failure to file information returns.
Individuals with unreported foreign income and accounts face the possibility of criminal prosecution.
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Taxpayers who want to significantly limit their exposure to IRS criminal prosecution and overwhelmingly burdensome IRS penalties must act fast.
Foreign Bank Accounts
Offshore bank accounts and offshore income require special IRS and Department of Treasury reporting. Owning an offshore account is not illegal but taxpayers are required to declare and report any offshore bank accounts and income each year with their tax returns.
Offshore Banking is currently under great scrutiny by the United States Department of Justice (the “DOJ”) and the IRS.
The Foreign Bank Account Report (the “FBAR”) is used to report a taxpayer’s financial interest in or authority over offshore accounts in a foreign country.
The willful failure to disclose offshore accounts, or to report all of the information required on an FBAR, can result in severe IRS civil and IRS criminal penalties.
The Pappas Group has handled dozens of voluntary disclosure/amnesty filings and is experienced in assisting and representing taxpayers with all of the reporting and tax implications of offshore banking.
Contact us today for a free consultation about your case and whether or not the OVDI is right for you.