Estate Discovered Undisclosed Foreign Accounts
What if an Estate Discovers Undisclosed Foreign Accounts & Assets: When a loved one passes away, it is a very traumatic event for all involved. While tax compliance is not the main concern for the family, it is (unfortunately) something for the parties involved to have to contend with — and there are certain timelines that must be met. It will of course take the heirs, relatives and other players a significant time to compile sufficient information to file IRS tax returns, evaluate the decedent’s assets, bank accounts and other investments. After some digging, the estate may learn that the decedent had overseas accounts, assets, investments and/or income that had not been properly reported to the IRS and FinCEN. This is not an uncommon occurrence — and there are safe methods for the estate to bring the decedent and/or estate into compliance in order to avoid future issues and tax headaches:
Compile a List of the Foreign Accounts
From the outset, it is important to have a baseline understanding of what type of foreign assets, accounts, investments and/or income will comprise the offshore disclosure submission. If you believe there are some unreported accounts or assets, the first step should be identifying what those accounts and assets are — and how far back the non-reporting spans. It is also crucial to keep in mind any person is not required to go back resolve the issue for every year in perpetuity — there are various compliance periods that the programs require taxpayer adhere to.
Review Old Tax Returns
Sometimes, people will be surprised to learn there may have been prior reporting already completed. That is why it is crucial to be sure it is the decedents actual filed tax returns — and not just a draft that they may have received, which does not reflect the final copy of the form that was actually filed.
Did Decedent Use a Tax Professional
If the person who passed away utilized a tax professional, it may help to get in contact with that prior tax professional to get an understanding of what forms were filed — and what information was known or available. Before reaching out to the prior tax professional, Taxpayers may want to consult with an attorney first to get a consultation explaining the potential pitfalls and how best to proceed — since there is no attorney-client privilege with the prior tax professional non-attorney.
Extent of Non-Reporting
Once you are aware of the total number of accounts and the extent of the non-reporting, then you can effectively evaluate and assess how large or small the project of getting into compliance might be. It is also important to understand the timing in conjunction with filing the decedent’s last tax return, estate tax returns — and any future required tax returns.
Tax Paths for Overseas Non Compliance
International Tax Amnesty Programs are programs developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance to get into offshore compliance. Estates are eligible to apply to the programs.
Some of the more common programs, include:
- Voluntary Disclosure Program (VDP or “New” OVDP)
- Streamlined Domestic Offshore Procedures
- Streamlined Foreign Offshore Procedures
- Delinquency Procedures
- Reasonable Cause
International Tax Lawyers Represent Clients Worldwide
Golding & Golding International Tax Lawyers specialize exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm for assistance.