Unreported Foreign Assets
Unreported Foreign Assets: Unreported Foreign Assets has become a big issue. In recent years, the IRS has implemented an aggressive enforcement policy when it comes to foreign accounts compliance. The failure to report foreign assets may result in offshore fines and penalties. What makes reporting of offshore assets and investments complicated, is that there are several different international reporting forms — and they are not mutually exclusive from each other. Some more common forms are the FBAR and FATCA Form 8938.
When a person is out of compliance, they may consider one of the amnesty programs to get compliant.
There are several foreign asset Tax Amnesty programs, collectively referred to as voluntary disclosure.
Important Tips You Should Know
If you have unreported foreign assets that qualify as Foreign Financial Assets that must be reported under FATCA (Foreign Account Tax Compliance Act), you should consider voluntarily disclosing the Foreign Assets before the IRS finds you, and penalizes you.
You Are Not Alone
We speak with thousands of people each year, and oftentimes the situations starts the same: you recently came into the knowledge (unfortunately) that your foreign assets, which you have never reported to the IRS, should have been reported with your tax return — and you are scared (rightfully so).
It May Not Be That Bad
First, take a deep breath…and exhale. The reality is, as long as you act before the IRS contacts you, you can usually mitigate most, if not all of your Damages (presuming you are non-willful).
While not everyone with Unreported Foreign Assets will get caught by the IRS, if you are considered a U.S Person, you have unreported foreign assets and the IRS discovers you have these assets before you have an opportunity to get into compliance, you may be facing significant fines and penalties.
Which Foreign Assets do I Report?
Essentially, foreign assets are any assets that you own outside of the United States. These assets can come in many different shapes and forms. For example, foreign assets will typically include:
- Foreign Bank Accounts
- Foreign Investment Accounts
- Interest in a Foreign Partnership/Joint Venture/Trust
- Interest in a Foreign Corporation (included Sociedad Anonimas)
- Foreign Retirement
- Foreign Life Insurance Policy
- Foreign Mutual Funds or ETF Investments
- Foreign Real Estate owned by a company
Why Do I have to Report to the IRS?
If you are considered a US person and are required to file a U.S. tax return (even if you do not meet the threshold for filing a return in any particular year), you may still be required to report the foreign assets.
The reason you may have to report the assets is because the United States follows a Citizen-Based Taxation (CBT), Worldwide Income tax model. In other words, if you are considered a U.S. person (which is far more broad than a US citizen) then you are required to report and disclose your foreign assets — depending on the type of asset, the nature of investment, and threshold amount.
For example, if you are single and own a specified foreign asset worth $80,000, then you have to file a Form 8938 (limited exceptions apply)
If you have 15% ownership of a foreign corporation, you may have to file a Form 5471.
Likewise, if you have 15% ownership in a controlled foreign partnership, you may also have the file a Form 8865.
Who Cares if I Don’t Report my Foreign Assets?
The IRS cares, and unfortunately, they care a lot. So much so, that the penalties for the failure to not follow these forms can go upwards of $10,000 per occurrence – and that is presuming that you are non-willful.
It turns out that if the IRS believes that you knew, or should have known that you had a reporting requirement but failed to do so, you could be facing much higher fines and penalties, along with a potential criminal investigation.
To that end, in order to assess your situation and get into compliance, here are few steps you should take:
Do You Have Foreign Assets?
Whether or not your foreign assets may be exempt or are otherwise excluded from reporting is not the first step. Rather, the very first step should be determining whether you have any money or assets outside of the United States.
You should speak with relatives or other individuals who may have included your information on their account because under some circumstances you may have to report this money, even if it is not yours – although you can usually avoid any penalty on money or assets that do not belong to you.
Once you have determined you have foreign assets, the next step is to determine what type of foreign assets you have.
What Types of Foreign Assets?
We recommend making a short mental list detailing the different assets, and breaking them down by category. For example, if you have foreign bank accounts — that might be one category. Foreign real estate that you used to rent property would be another category, and foreign investment accounts would be yet another category.
Once you have all of this information together, the next step should be assessing the value.
How do I Value the Assets?
The simplest, most basic way to assess the assets this early in the analysis is to simply go online and look up what the Treasury Department or other exchange rate is for your country(s) in the current year. Thereafter, you should perform a raw data currency exchange to have a basic idea of what the total value of your assets are. (You may perform the exchange for a few prior years as well).
Golding & Golding: About our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
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 Offshore 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.)
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Dually Licensed as an EA (Enrolled Agent) or CPA
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.