What is a Full, Voluntary Disclosure?

The IRS Voluntary Disclosure Program requires the U.S. taxpayer to fully and voluntarily disclose any and all unreported or under-reported offshore income, assets, investments, and accounts.  It also requires taxpayers to pay all back taxes, penalties, interest, and fines.

The truthful, timely compliance of the taxpayer demonstrates a willing effort to come into compliance, determine liabilities and make “good faith arrangements” with the agency to pay all financial amounts owed in a timely manner.

The Foreign Account Tax Compliance Act (FATCA) is designed to increase compliance. It requires foreign banks to identify the accounts of people who may owe tax on the funds in the U.S.

Generally, it is far better to voluntarily report required information about these accounts to the IRS than to have a foreign bank report your information to the IRS.

The Impact of FATCA – There is Nowhere and No Way to Hide

It is hard to overstate the impact of FATCA, the Foreign Account Tax Compliance Act. One of its primary purposes was to add substantial transparency into the activities and financial interests of US taxpayers worldwide. The US government grew tired of “tax havens” and the ability of US taxpayers to avoid paying taxes by hiding income and assets offshore.

Important Fact: FATCA has forever changed the nature of financial activities for all US taxpayers worldwide.  The IRS receives electronic disclosures directly from the vast majority of Foreign Financial Institutions (FFIs) disclosing the accounts and assets of US taxpayers, and in many cases, transactional information as well.

FATCA generally states, “If you want to conduct business in or with the United States and any of its territories, you will provide us with information about our taxpayers’ activities. FATCA is a reciprocal agreement, and it is important to understand that information flows both ways.

FATCA compels Foreign Financial Institutions (FFIs) to provide electronic reporting to their sovereign tax authorities, who share information directly with the IRS about any offshore financial account associated with a US taxpayer.  This also applies to foreign business, corporate, and financial entities that are owned (at least in part) by US taxpayers.  If an FFI fails to provide information, they face significant financial consequences, including a 30% withholding of any “US Source Payments” to the FFI.  This is a “big bat” that more than encourages disclosures sought by the IRS.

The information to be reported includes the Taxpayer Identification Number (TIN) of a US taxpayer that has signatory or controlling interests over any financial account (including cryptocurrency) or “non-US entity.”  The information in these transmissions may surprise you.  FFIs must report information about offshore accounts, including account numbers, balances, and deposit and withdrawal information.  The FFI provides important information, including the name, address, and TIN of an account holder, as well as income-related data concerning interest, dividends, and other forms of income associated with the account.

If the account is an entity, the FFI data will include the name, address, and identification number of the associated entity as well as substantial information on US taxpayers associated with the account (including their TIN or Social Security Number).There is simply nowhere and no way to hide your offshore accounts, income, investments and assets, including cryptocurrency, from the IRS.