It is not uncommon for American individuals and businesses to keep some of their financial assets overseas. While there are benefits that can come with using offshore accounts, you still have a responsibility to report your assets and pay the taxes on any income generated.
If you believe you are out of compliance with offshore account reporting, now is the time to seek guidance from a seasoned tax lawyer. A Bethesda offshore disclosure lawyer could review your records and your history of tax filings before assisting you in coming into compliance with the IRS.
The IRS has strict reporting requirements when it comes to assets and income, and those requirements include a taxpayer’s worldwide income and specific assets in foreign countries. Collecting these taxes is accomplished through mandatory reporting by taxpayers.
There are several laws that address reporting requirements for offshore financial assets. One of the most prevalent is Reports of Foreign Bank Accounts, or FBAR. This report is made along with annual tax returns but only for foreign financial accounts that in aggregate are worth at least $10,000 at any point in the year.
There is also a federal law known as the Foreign Account Tax Compliance Act. Commonly referred to as FATCA, this law has been in place since 2010. The reporting requirement is similar to FBAR but taxpayers must comply with both. FBAR is regulated by the U.S. Treasury, while FATCA involves reporting to the IRS.
There are numerous reporting requirements that come with offshore assets and each of these requirements involves its own documentation. Taxpayers that hold financial accounts overseas could be responsible for filing numerous forms with the IRS or U.S. Treasury. The failure to file any of these forms opens a taxpayer up to civil penalties, with the possibility of criminal action if it is determined that the failure to file was willful. A Bethesda offshore disclosure attorney could assist with ensuring compliance with each of these forms in order to prevent significant penalties.
It is important to file these forms on time but sometimes mistakes are made. Some taxpayers are unaware that they have the requirement of reporting offshore accounts until the deadline has passed. If the value of the financial accounts at issue exceeds $100,000, an individual or business should ask an attorney for help with resolving this problem.
One of the most commonly-used forms for reporting offshore financial accounts is IRS Form 8938. This form must be submitted along with a tax return each year. Whether or not this form is required will depend on the amount a taxpayer holds in foreign accounts, as well as the residency and marital status of the filer. An unmarried individual who lives within the United States must report overseas financial assets if it is over $50,000, while a married couple filing jointly and living outside of the country must report if they have at least $400,000 in their accounts.
The IRS allows taxpayers to voluntarily report their undisclosed offshore accounts with minimal penalties, provided that they qualify and follow the directions of these procedures closely. The primary methods of disclosure are the streamlined offshore procedure (one for those living within the United States and one for those living outside of it), which requires submitting three years of tax returns and six years of FBARs, as well as a written narrative explaining why they failed to report this information previously. Taxpayers using the domestic streamlined procedure will incur a 5% penalty. There is also a delinquent FBAR submission process and, in some rare cases, a quiet disclosure option.
The value in speaking with an offshore disclosure lawyer in Bethesda is that they can determine which disclosure program, if any, is ideal for the taxpayer’s current situation, and guide them every step of the way so that they do not incur further penalties.
If you own financial assets or accounts overseas, you have an obligation to report if they are valued above a certain amount. Keeping up with these requirements is important, as there are consequences that come with non-compliance. A Bethesda offshore disclosure lawyer could help you get into good standing with the IRS if you have not been meeting your obligations. Reach out for a private consultation as soon as possible.