Yesterday, we discussed the rapidly rising number of “Report of Foreign Bank and Financial Reports” or FBARs filed in 2015. This continues a five year rising trend, and demonstrates the number of US taxpayers with offshore bank accounts and international investments. It also leads to a serious question for FBAR filers:
Should a US taxpayer who files an FBAR with the IRS consider a voluntary disclosure such as the Offshore Voluntary Disclosure Program or OVDP?
Yes. If you have filed an FBAR with the IRS, you should consider your IRS returns for the past 6 to 8 years and consider the implications of compliance with the IRS FBAR and voluntary disclosure requirements.
Let’s begin with a simple question:
Has the accumulated total of all of your offshore bank accounts, investments, and assets exceeded $10,000 at any point – even for a day?
If yes, then you are required to file the IRS “Report of Foreign Bank and Financial Reports” or FBAR for each year this occurred. Here is the critical question:
Have you fully disclosed every offshore account, every foreign investment, every foreign business interest, every offshore asset to the IRS on your FBAR for the past 6 to 8 years?
This is a challenging question for many US taxpayers. Many well-intentioned US taxpayers were not aware that they were required to do so. Some US taxpayers have purposefully hidden offshore accounts and assets from the IRS in order to reduce their tax burden. It doesn’t matter what the reason was, if you have not fully disclosed all required information to the IRS on the FBAR and associated IRS forms, you face substantial draconian penalties exceeding 50% of the highest balance of your accounts at any point in time regardless the present balance. You also face potential criminal tax evasion charges.
The IRS has provided a method for US taxpayers to come into compliance with FBAR reporting requirements: the OVDP or Offshre Voluntary Disclosure Program. The OVDP provides relief from many penalties and interest and discharges the criminal exposure US taxpayers will face for non-reported or under-reported offshore assets, bank accounts, and investments.
There is one more important fact you should consider:
The IRS has entered into agreements with tens of thousands of international banks, investment houses and sovereign tax authorities to exchange detailed account and transaction information on all US taxpayers, trusts and corporate entities. Most Swiss and Cayman Island banks and investment houses are providing detailed financial information directly to the IRS, and associating it to your social security number or federal tax ID. There are no hiding places left in the world. The list of institutions providing information to the IRS grows weekly.
If you have had more than $10,000 total at any point in the past 6 to 8 years accumulated in offshore accounts, investments or assets you should contact the experienced international tax attorneys at Allen Barron immediately for a free and substantive consultation at 866-631-3470. We will help you to understand exactly where things stand, while providing the protections of the attorney-client privilege.
Tomorrow we will continue our series by reviewing the issues of “willful” versus “non-willful” behavior from the perspective of the IRS.