Correcting Offshore Account Disclosure Violations: If You Failed to File an FBAR or Form 8938

Taxpayers who own offshore accounts may need to disclose these accounts to the federal government annually using a Report of Foreign Bank and Financial Accounts (FBAR) and/or IRS Form 8938. Failure to file an FBAR or Form 8938 can have serious consequences, so it is imperative that taxpayers who are behind on their offshore account disclosures work diligently to come into compliance. Learn more from Virginia international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.

Two Possible Options for Correcting Offshore Account Disclosure Violations

Aside from filing a delinquent FBAR or Form 8938 (which carries its own set of risks), taxpayers generally have two possible options for correcting offshore account disclosure violations. As explained below, however, these are options in different circumstances, so taxpayers must choose the correct option based on the specific circumstances at hand.

1. The IRS’ Streamlined Filing Compliance Procedures

Taxpayers who have inadvertently failed to file an FBAR or Form 8938 (or both) may be eligible to use the IRS’ streamlined filing compliance procedures. As the IRS explains, the streamlined procedures “are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.”

Additional eligibility criteria apply as well, and the IRS has established different streamlined filing compliance procedures for taxpayers living in the U.S. and taxpayers living abroad. Furthermore, while taxpayers must certify that their offshore account disclosure violations were non-willful in order to submit a streamlined filing, the IRS is not necessarily obligated to accept taxpayers’ certifications. As a result, an informed approach is essential, and taxpayers who are considering a streamlined filing will want to consult with experienced tax counsel before moving forward.

2. The IRS’ Voluntary Disclosure Program

Taxpayers who are not eligible to submit a streamlined filing because their offshore account disclosure violation was willful may be eligible to participate in the IRS’ voluntary disclosure program. Willful violations carry the risk of criminal prosecution, and submitting a voluntary disclosure provides an opportunity to resolve willful violations before criminal charges are filed.

Here too, strict eligibility criteria apply, and taxpayers need to ensure that submitting a voluntary disclosure is their best option before moving forward. Crucially, submitting a voluntary disclosure does not necessarily mean that the IRS will accept it—and, if the IRS rejects a voluntary disclosure, it can use the information disclosed to pursue criminal charges. With this in mind, and in light of the substantial risks involved, working closely with an experienced Virginia international tax attorney throughout the voluntary disclosure process is strongly recommended.

Discuss Your Options with Virginia International Tax Attorney Kevin E. Thorn

If you need to know more about your options for correcting an offshore account disclosure violation, we encourage you to contact us promptly. To discuss your options with Virginia international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 703-752-3752 or contact us confidentially online today.