- 1 When Taxpayers Receive an IRS Foreign Account Exam Notice
- 2 Do Not Immediately Respond to the IRS
- 3 Review the Notice and What is Required
- 4 Assess what Type of Response the IRS Expects
- 5 Note the Date the Response is Due
- 6 Reach out to a Foreign Account Specialist to Assist You
- 7 Late Filing Penalties May be Reduced or Avoided
- 8 Current Year vs Prior Year Non-Compliance
- 9 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 10 Need Help Finding an Experienced Offshore Tax Attorney?
- 11 Golding & Golding: About Our International Tax Law Firm
When Taxpayers Receive an IRS Foreign Account Exam Notice
In recent years, the Internal Revenue Service has significantly increased the enforcement of foreign accounts compliance. In general, taxpayers who are considered U.S. persons for tax purposes may be required to file various international information reporting forms each year to disclose their foreign accounts, assets, and investments to the U.S. Government. This may include foreign bank accounts, investment accounts, mutual fund and ETF accounts, pension plans, life insurance, and more. And, because of FATCA (Foreign Account Tax Compliance Act), more than 110 foreign countries and hundreds of thousands of foreign financial institutions (FFIs) across the globe now provide names and other information about US persons who have investments abroad. So, what should a taxpayer do, if they receive an IRS notice of a foreign account exam or audit?
Do Not Immediately Respond to the IRS
First, it is important to not reach out directly and contact the IRS before you speak with an attorney. That is because sometimes taxpayers may end up providing more information to the IRS that they do not have and/or may not be entitled to during the examination.
Review the Notice and What is Required
When the taxpayer receives the exam notice, it is important to review it to assess specifically what the IRS is asking for and what type of documentation, if any the Internal Revenue Service is asking the taxpayer to provide prior to an examination.
Assess what Type of Response the IRS Expects
Oftentimes, the foreign accounts exam notice will provide information about how the taxpayer should respond to the IRS. Very typically, they will request the taxpayer to contact the agent assigned in order to schedule the exam date. Since these types of initial conversations may lead to questions from the IRS, it is preferred for taxpayers to have their attorney or representative reach out.
Note the Date the Response is Due
Taxpayers should be sure to calendar the final date for response to ensure that they do not miss the date. These notices are typically sent by certified mail, so the IRS is aware that the taxpayer has received it.
Reach out to a Foreign Account Specialist to Assist You
Foreign account and asset exams can be very complicated. Taxpayers may want to consider hiring an attorney since only with an attorney do they have the attorney-client privilege. If for any reason the exam is referred to for a quasi-criminal or criminal investigation, any information provided to an accountant may not be considered privileged and may be discoverable by the IRS. Taxpayers should consider hiring a Board-Certified Tax Law Specialist who specializes exclusively in foreign account matters.
Late Filing Penalties May be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.