Reporting Offshore Accounts in 2019 – Learn How to Get IRS Compliant (Golding & Golding)

Reporting Offshore Accounts in 2019 – Learn How to Get IRS Compliant (Golding & Golding)

Reporting Offshore Accounts in 2019 – Learn How to Get IRS Compliant

Reporting Offshore Accounts: If you have offshore accounts and recently learned that you were required to report these accounts to the IRS, you may have found yourself diving into various rabbit holes — only to come up empty-handed.

Unfortunately, Google is a hit or miss…and more often than not — it’s a miss.

Are Offshore Accounts Illegal?

No.

The reason why the information regarding offshore accounts is inaccurate, is because people presume an offshore account is illegal, or that the account is located in an offshore tax haven — and even then, that does not by default make the offshore account illegal.

First, there is nothing illegal about having an offshore account.

Second, the term offshore is a bit of a misnomer because it includes when dealing with the IRS, since the term “offshore” includes any foreign account and on its own does not presume anything unethical.

For example, you could be in the UK and open up an account in a Barclays account in the Isle of Man, and Barclays will deem the account an “offshore account “– does that make it illegal?

No.

Do I Have to Report Offshore Accounts?

Yes, if you meet the threshold requirements to report foreign accounts, then all accounts must be reported.

The Internal Revenue Service wants information. And, when that information involves your offshore accounts, the information includes items such as:

  • Where the account is located
  • The address at the branch for main office
  • The maximum balance throughout the year
  • Any income that was generated
  • The type of income that was generated
  • When the account was opened or closed
  • Is it jointly held with a spouse?

Having to Report Offshore Accounts to the IRS is not Fair

While the information can appear somewhat intrusive (because it is intrusive) it has just become a way of life for U.S. person who meet the threshold requirements for reporting (at the current time, attempts at repealing FATCA have been denied).

Who is Considered a U.S. Person?

  • U.S. Citizen
  • Legal Permanent Resident (Green-Card Holder)
  • Foreign Residents who meet the Substantial Presence Test

What if You Have Not Report Offshore Accounts in Prior Years?

If you are out of compliance for not properly filing or reporting offshore account information to the Internal Revenue Service,  you are technically out of compliance.

And, like anything in life once yo a’re out of compliance you have two ways to go:

  • You can take an about-face and get into compliance; or
  • You can go further out of compliance come and hope to not get caught

While they are pros and cons to either approach, with the recent introduction of FATCA, J5, International tax enforcement groups, and renewed interest in FBAR compliance, you are probably better off with biting the bullet, and getting into compliance now.

You Need an Attorney and Law Firm that is Highly-Experienced

We have successfully more than 1000 offshore Disclosures — including complex issues involving FATCA, PFIC, CFC, Foreign Mutual Funds, and more.

Some less experienced attorneys will rely on issuing a  “Kovel Letter” (since they do not have the tax experience needed to represent you) but it puts your confidentiality at risk.

The area of law is always changing, and due to recent updates in the law, including changes to various international tax agreements, regulations, statutes, and enforcement procedures — oftentimes even a “simpler” FBAR disclosure becomes an incredibly complicated process. 

We routinely represent clients in:

  • FATCA
  • FBAR
  • PFIC
  • Offshore Assets
  • Offshore Investments
  • Offshore Income
  • Offshore Accounts
  • Foreign Businesses
  • Foreign Life Insurance
  • Foreign Cryptocurrency
  • Foreign Real Estate
  • Foreign Gifts
  • Foreign Inheritance
  • International Tax Investigations
  • Tax Treaty Analysis
  • “Cross-Border” issues

Golding & Golding is led by a Board Certified Tax Law Specialist (less than 1% of Attorneys nationwide) who practices exclusively in Offshore Disclosure.

We represent clients nationwide and worldwide in nearly 70-countries with all aspects of OVDP (IRS Offshore Voluntary Disclosure Program).

5 Easy Ways to Vet Out IRS Offshore Disclosure Attorneys

Offshore disclosure is like a puzzle. And, you need all the pieces of the puzzle to complete the task at hand. 

There is a reason why the top tax attorneys nationwide in IRS Offshore Disclosure generally will have five (5) main qualifications:

  • Board Certified Tax Law Specialist (less than 1% of attorneys nationwide)
  • Enrolled Agent or CPA status
  • LL.M. (Masters in Tax)
  • Litigation & Trial Experience
  • A Firm that Specializes Exclusively in IRS Offshore Disclosure

Hiring an Offshore Disclosure Lawyer – 5 Types of Lawyers to Avoid

Beware of Copycat Law Firms

Unlike other attorneys who call themselves specialists or experts in Voluntary Disclosure but are not “Board Certified,” handle 5-10 different areas of tax law, purchase multiple keyword specific domain names, and even practice outside of tax, we are absolutely dedicated to Offshore Voluntary Disclosure.

*Click here to learn the benefits of retaining a Board Certified Tax Law Specialist with advanced tax credentials.

IRS Penalty List

The following is a list of potential IRS penalties for unreported and undisclosed foreign accounts and assets:

Failure to File

If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty. The failure-to-file penalty is generally more than the failure-to-pay penalty.

The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

Failure to Pay

f you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty.

However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Civil Tax Fraud

If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud.

A Penalty for failing to file FBARs

The civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign financial account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

A Penalty for failing to file Form 8938

The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

A Penalty for failing to file Form 3520

The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

A Penalty for failing to file Form 3520-A

The penalty for failing to file each one of these information returns or for filing an incomplete return, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.

A Penalty for failing to file Form 5471

The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

A Penalty for failing to file Form 5472

The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.

A Penalty for failing to file Form 926

The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

A Penalty for failing to file Form 8865

Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

Fraud penalties imposed under IRC §§ 6651(f) or 6663

Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.

A Penalty for failing to file a tax return imposed under IRC § 6651(a)(1)

Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.

A Penalty for failing to pay the amount of tax shown on the return under IRC § 6651(a)(2)

If a taxpayer fails to pay the amount of tax shown on the return, he or she may be liable for a penalty of .5 percent of the amount of tax shown on the return, plus an additional .5 percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding 25 percent.

An Accuracy-Related Penalty on underpayments imposed under IRC § 6662

Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty

Possible Criminal Charges related to tax matters include tax evasion (IRC § 7201)

Filing a false return (IRC § 7206(1)) and failure to file an income tax return (IRC § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322.  Additional possible criminal charges include conspiracy to defraud the government with respect to claims (18 U.S.C. § 286) and conspiracy to commit offense or to defraud the United States (18 U.S.C. § 371).

A person convicted of tax evasion

Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.  A person convicted of conspiracy to defraud the government with respect to claims is subject to a prison term of up to not more than 10 years or a fine of up to $250,000.  A person convicted of conspiracy to commit offense or to defraud the United States is subject to a prison term of not more than five years and a fine of up to $250,000.

4 Types of IRS Voluntary Disclosure Programs

There are typically four types of IRS Voluntary Disclosure programs, and they include:

Contact Us Today; Let us Help You.


International Tax Lawyers - Golding & Golding, A PLC

International Tax Lawyers - Golding & Golding, A PLC

Golding & Golding: Our International Tax Lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70 different countries. Managing Partner, Sean M. Golding, JD, LL.M., EA and his team have represented thousands of clients in all aspects of IRS offshore disclosure and compliance during his 20-year career as an Attorney. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo and various Law Journals nationwide.

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, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)
International Tax Lawyers - Golding & Golding, A PLC