What should you do if you need to come into compliance with IRS and FBAR reporting? There are 3 options for coming into compliance with your obligation to report offshore asset holdings: The Voluntary Disclosure Practice or VDP, the Streamlined Filing Compliance Procedures or SFCP, or the delinquent FBAR and information return submission procedures.
The Voluntary Disclosure Program or VDP generally applies to US taxpayers who might have a risk of criminal exposure for their failure to report offshore financial assets and accounts and pay all associated back taxes. The SFCP are usually appropriate for US taxpayers who are able to prove to the IRS their past failure to meet the FBAR reporting requirements was not a willful attempt to evade taxes. In minor omissions or inaccuracies we use the delinquent FBAR and information return submission procedures.
The IRS imposes several penalties associated with a US Taxpayer’s attempt to come into compliance with IRS and FBAR reporting. Generally speaking, if the non-reporting and underpayment of associated tax was due to negligence or disregard for the rules the penalty is as much as 40% of the underpayment of associated taxes. There are delinquency penalties based upon the failure to originally provide full and accurate information and file your accurate return on time. If the IRS believes the underpayment of taxes is due to fraud the penalty may be up to 75% of the underpayment plus any additional criminal penalties.
In addition, the IRS charges Information Return Penalties for those filing a late form 8938 (disclosure of specified foreign financial assets) of $10,000 for any tax year. If the IRS obtains information from an offshore source or sends you a notice of the failure to file Form 8939 you have 90 days to respond. Failure to do so results in an additional penalty of $10,000 for each 30 days (or part of a month) you are late to respond, usually capping out at $50,000.
Allen Barron is uniquely positioned to provide expert counsel and to help US taxpayers to come into compliance with IRS and FBAR reporting requirements. Our tax attorneys extend the valuable protections of the attorney-client privilege which keeps our client’s information safe from the IRS while we evaluate potential options and submit our reporting to the IRS. We invite you to contact Allen Barron or call today to schedule a free and substantive consultation at 866-631-3470.