IRS Offshore Penalties (2019-2020 Summary Update)
IRS Offshore Penalties: In recent years, the IRS Offshore Penalties have become progressively worse. How the IRS dings overseas assets & accounts, and issues offshore penalties can be complicated. The Internal Revenue Service has taken an aggressive approach towards foreign accounts compliance. The failure to timely report offshore accounts, assets, investments and income may result in significant fines and penalties, including FBAR penalties — which can be very bad. In order to avoid offshore penalties, the IRS has developed various amnesty programs, such as FBAR Amnesty and FATCA Amnesty — collectively, the amnesty is referred to as voluntary disclosure.
IRS Offshore Penalties
IRS offshore penalties refers to the various different penalties that the Internal Revenue Service can issue for non-compliance of international information reporting. There are various forms that U.S. persons have to file in order to report their foreign assets and income.
The failure to report the forms can lead to severe penalties. Common offshore penalties, include:
Who is a U.S. Person?
Many people are unclear as to the requirements for individuals to report their worldwide income to the U.S. government on their tax return — which is understandable, since the IRS has been less than clear as to who must report. A U.S. person is more than just a U.S. citizen. In dealing with individuals (as opposed to entities), a U.S person is either a:
- U.S. Citizen
- Legal Permanent Resident, or
- Foreign National who meets the Substantial Presence Test.
It does not matter if the U.S. person resides in the United States or outside of the country, and it does not matter if the foreign national travels back and forth between United States and a foreign country (presuming that he or she meets the substantial presence test, and is in the US for at least 30 days in the current year).
Foreign Accounts and Assets
There are many complex rules involving reporting foreign accounts and assets. Generally, the most common forms a person may have to file are:
Once a person is considered a U.S. person, they have to report their worldwide income and assets to the United States government on their tax return. This is true, even if:
- The income was already taxed in a foreign country (you can still claim a foreign tax credit), and/or
- The income is tax-free in a foreign country (you have to refer to the treaty) and/or
- A person earns income and it is below $100,000 per year (you still have to claim the foreign earned income exclusion).
The IRS is Losing out on Tax Money
The biggest problem for the IRS, is just trying to keep track of all the foreign money that is being generated by U.S. persons but not being taxed or reported. From the IRS’ perspective, all of that money should be reported and taxes — unless it is specifically excluded from U.S. tax.
The IRS Has Developed Solutions to Uncover Hidden Accounts
To resolve this issue, the U.S. Government has developed many tactics to uncover undisclosed for and offshore accounts, assets, and income. Two of the biggest weapons are FATCA and ITEG.
FATCA is the Foreign Account Tax Compliance Act. We have written numerous articles on the subject, but boiled down to its simplest form, the U.S. has entered into bilateral agreements with more than 110 different countries. The agreements require the reciprocal reporting of foreign account information of US account holders to the IRS, and vice versa. More than 300,000 foreign financial institutions have agreed to report this account holder information to the IRS.
The IRS has developed several International Tax Enforcement Groups designed specifically to review, evaluate and assess tax positions taken on tax returns to determine whether they are proper. Some of these issues include foreign tax credits, foreign earned income exclusion, and the new section 965 repatriation of foreign income — along with various other tax enforcement initiatives.
Golding & Golding (Board-Certified Tax Law Specialist)
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the Enrolled Agent credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Form 8938 Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
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.