IRS Offshore Compliance – Avoid IRS Offshore Bank Account Penalties
IRS Offshore Compliance (2019) – Avoid IRS Offshore Bank Account Penalties
IRS Offshore Compliance: In 2019, the IRS continues to enforce offshore penalties against non-compliant taxpayers with unreported foreign accounts.
Remember all those New Year’s resolutions you made when you were drunk?
Well, in addition to eating healthy, working out every day, eating ALL your vegetables, and overall foregoing any other sources of fun or delight in your life – you may also be considering getting into Offshore Compliance.
IRS Offshore Compliance
IRS offshore compliance generally consists of submitting to one of the approved tax amnesty programs for your unreported offshore and foreign accounts, assets, investments, and Income.
Over the past few years, the Internal Revenue Service has made the enforcement of offshore compliance a key priority.
With the recent introduction and enforcement of FATCA, coupled by a renewed interest in FBAR (FinCEN 114) – in addition to the various International tax enforcement groups that have recently sprouted up — now may as be as good a time as any to get into compliance.
With so much misinformation online, and every tax attorney suddenly deeming themselves offshore voluntary experts and specialists, it is important that you at least have a basic understanding of what your voluntary disclosure/tax amnesty options are in moving forward.
The following is a brief summary five (5) important things you should know about iris offshore compliance procedures.
OVDP vs. IRM
In the past, OVDP was reserved or offshore related activities. While a person could have both offshore and domestic unreported money and assets, there had to at least be some offshore or foreign money – or else the applicant would apply to the traditional voluntary disclosure program (IRM) which was sometimes referred to domestic voluntary disclosure.
On September 28, 2018, the IRS discontinued OVDP. On November 28th 2018 the IRS issued a memo dated November 20, 2018, which updated the traditional voluntary disclosure program – and delved into much more detail about offshore and foreign related activities.
We have prepared a summary of the updated procedures, which you can find here.
The Streamlined Disclosure programs, otherwise known as the Streamlined Filing Compliance Procedures (SFCP) – which are broken down further into the Streamline Domestic Offshore Procedures (SDOP) and the Streamlined Foreign Offshore Procedures are still available – but for how long nobody knows. The IRS has made it known that these procedures will not be around forever.
It is the IRS’ pattern and practice to incrementally increase offshore penalties associated with the amnesty programs. The Streamlined Foreign Program has no penalties, but that can always change.
In addition, the Streamlined Domestic Procedures carry a 5% penalty — and chances are at some point the IRS will increase that penalty.
We have prepared a summary regarding the streamlined procedures, which can be found here.
Reasonable Cause/Delinquency Procedures
Reasonable cause is an alternative for individuals who were both non-willful, and can show that their noncompliance was reasonable. It typically requires a higher burden on the taxpayer than is required under the streamline program, but it may result in a penalty waiver.
Since there’s no specific form for a reasonable cost statement submission come It is important that you utilize attorney/EA or CPA who has significant experience handling these types of matters.
Delinquency Procedures are very limited to situations in which a person pretty much has no unreported income/tax liability (since it only involves filing previously unfiled forms).
We have prepared a summary regarding reasonable cause, which can be found here.
For tax year 2017, a person may be subject to a repatriation tax depending on the amount of previously untaxed income they have overseas.
This is a complex analysis, and if you have not previously submitted the repatriation analysis as part of your 2017 return (or have not filed the 2017 return yet) it is something to keep in mind when moving forward.
GILTI is also a very complex analysis. Starting in 2018, it may be required for certain U.S. shareholders who have interest/ownership of a Controlled Foreign Corporation (CFC).
For certain U.S. shareholders, they may have to pay a tax that is somewhat similar in concept to taxes due on Subpart F income.
In essence, it means that if a person has Subpart F income, then even if the money has not been distributed to them — there may still be a tax liability associated with the non-distributed income.
For some individuals who own multiple Controlled Foreign Corporations resulting in a net loss of the applicable income — it may not be that big of deal.
But for many of our clients who operate professional corporations abroad, where the primary source of income is service related, and the assets of the corporation a relatively small — there can be a pretty heavy tax burden.
**Special rules apply to Corporate Shareholders vs. Individual Shareholders.
We Specialize in Safely Disclosing Foreign Money
We have successfully handled a diverse range of IRS Voluntary Disclosure and International Tax Investigation/Examination cases involving FBAR, FATCA, and high-stakes matters for clients around the globe (In over 65 countries!)
Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.
Be Careful of the IRS
With the introduction and enforcement of FATCA for both Civil and Criminal Penalties, renewed interest in the IRS issuing FBAR Penalties, crackdown on Cryptocurrency (and IRS joining J5), the termination of OVDP, and recent foreign bank settlements with the IRS…there are not many places left to hide.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.