Hear, Hear, Offshore Account Holders! The IRS Is Coming For You!
If you hold an offshore account, you must be aware of the strict watch that the IRS keeps on you. And until now, offshore account holders had the luxury of voluntarily disclosing their offshore accounts under the Offshore Voluntary Disclosure Program (OVDP), they no longer have this luxury. Why so?
For on September 28, 2018, the IRS declared that it is all set to officially revoke the OVDP. This stand was taken largely due to the fact that the taxpayer participation in the voluntary disclosure program has been dwindling over the past few years. But if even for a second you think that the IRS has now become lax in its determination to sniff out the taxpayers who have a high record of overseas income, you couldn’t be more wrong.
The IRS is still coming after you if you’re guilty!
As Don Fort, the Chief of IRS Criminal Investigation stated:
“The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts with the use of information resources and increased data analytics. Stopping offshore tax noncompliance remains a top priority of the IRS.”
In aid of the IRS is the Department of Justice whose Tax Division holds a 91.5% conviction rate for tax crimes.
While OVDP certainly had its unique benefits (reduced fines for taxpayers who willingly disclosed their account holdings and a minimal threat of criminal prosecution), even now you can voluntarily disclose your offshore account/assets through the other lesser-known voluntary disclosure programs. Because even before the OVDP came into existence, the IRS had a formal voluntary disclosure policy and this still remains valid now. Although the civil penalties are higher under this procedure, the threat of criminal prosecution will not loom over your head.
Those who think that they can escape the watchful eyes of the IRS and the Department of Justice are indeed making a big mistake. Times have changed and now the IRS has the support and cooperation of foreign countries and international banks who were reluctant to cooperate earlier as they were bound by secrecy. This increased collaboration of foreign institutions has enhanced the possibility of detection of hidden offshore assets. In fact, the IRS has made it clear that international partners played a significant role in its declaration about eliminating the OVDP.
Also, if you didn’t know already, the fine for failure to file FinCEN Form 114 (Report of Foreign Bank and Financial Accounts) is either $100,000 or 50% of the highest total balance of the offshore accounts for every year you fail to file an FBAR report. So, going by this, if you fail to file an FBAR for four consecutive years, you could be fined up to 200% of the aggregate value of your offshore accounts.
What is the IRS’ streamline procedure?
The Streamlined Filing Compliance Procedures of the IRS comes as a good news for those taxpayers who have committed offshore noncompliance unwillingly. Under this procedure, taxpayers residing both within the US and overseas can opt for a wilful compliance without paying any significant penalties. However, to avail this compliance benefit a taxpayer must meet the key requirement, that is, the noncompliance must have been non-wilful.
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