What's Next for Taxpayers With Undisclosed Foreign Assets?News, Offshore Account Update
Posted in on August 31, 2018
Any U.S. taxpayer is expected to comply with IRS rules and regulations, including in situations where a U.S. affiliated person lives abroad. There are strict rules in the United States for taxpayers who have financial accounts outside of this country, even if those taxpayers are living in a foreign jurisdiction and simply have an account in a bank where they live. Depending on the account's value, requirements may include filing an annual Report of Foreign Bank and Financial Account (FBAR). Taxpayers may also be required to disclose foreign assets by filing Form 8938 with their tax returns.
Unfortunately, many taxpayers do not know of these obligations to file FBARs or to file Form 8938. The penalties for failure to file can be substantial, so the IRS created an amnesty program, called the Offshore Voluntary Disclosure Program (OVDP), to allow taxpayers to face reduced penalties if they came forward and voluntarily reported their accounts after discovering they weren't in compliance with IRS reporting and disclosure rules.
Now, however, some big changes are upcoming that taxpayers need to be aware of. A Virginia tax attorney like Kevin Thorn can provide insight into what's next for offshore investors and can help investors with undeclared offshore accounts to take steps to protect their investments.
What Comes Next for Taxpayers With Undeclared Foreign Accounts?
The Offshore Voluntary Disclosure Program was first unveiled in 2009 to create a formalized process to allow taxpayers to come forward and report offshore accounts while reducing penalties and avoiding criminal prosecution.
OVDP ended shortly after it began in 2009, but Offshore Voluntary Disclosure Programs were again offered in 2011 and 2012, although later OVDP programs resulted in taxpayers facing larger penalties. When OVDP was amended in 2014, penalties went up yet again – but the financial consequences of voluntary disclosure were still less severe than the consequences if the IRS discovered undeclared offshore accounts on its own.
While OVDP was in effect, more than 56,000 taxpayers participated and more than $11.1 billion in back taxes were collected. However, OVDP is now scheduled to end. The IRS announced in March that taxpayers would no longer be able to participate in OVDP after September 28, 2018.
Taxpayers still have some time to participate in OVDP if they haven't yet done so and they want to. However, OVDP is not necessarily the right approach for everyone and those who are considering making a voluntary disclosure should first talk with a Washington DC tax evasion attorney to determine if that is actually the best course of action or not.
Some taxpayers are also eligible for streamlined compliance, which is available to taxpayers who did not willfully fail to comply with obligations related to reporting foreign financial accounts. Streamlined compliance will remain an option for taxpayers even once OVDP ends. However, taxpayers participating in streamlined compliance don't get the assurances OVDP provided that they're protected from criminal prosecution. They could also face future audits.
Because of upcoming changes to OVDP and the complexities associated with resolving tax issues connected with undeclared offshore accounts, it is important for taxpayers to get the proper legal help if they have foreign financial accounts but haven't complied with reporting rules. Speak with an attorney today to learn more. Contact Virginia tax attorney Kevin Thorn as soon as possible by calling 703-752-3752.Share This Post