A number of American taxpayers and businesses maintain substantial financial assets overseas. These assets can include foreign bank accounts, foreign real estate that generates income, or even ownership stakes in foreign companies. Federal law requires you to file this information to the IRS when these assets are over a certain value.
If you fail to file this information before the deadline, you are at risk of penalties. Fortunately, the IRS allows for late disclosures in certain circumstances, by joining one of a few different programs. Because of these sensitive “eggshell” investigations, it is important to first consult an overseas asset disclosure attorney before you decide to join an offshore disclosure program in Rockville.
A taxpayer has a few different options for coming into compliance with their offshore reporting. The two primary ways are the streamlined domestic offshore procedures and streamlined foreign offshore procedure. Although there is a 5% penalty for failing to file a Form 8938 on time (for the domestic program only), the streamlined method allows for taxpayers who engaged in non-willful conduct to get themselves in good standing with the IRS.
The only factor that determines which of those two programs a taxpayer must join is their residency: the domestic program is for those who reside within the U.S. and the foreign program is for those who reside outside of the U.S.
A taxpayer who has reported all of their overseas financial assets but did not file an FBAR has the ability to file one delinquently without any additional penalty. It must be done carefully, with the aid of an attorney, or else there is a risk of a $10,000 penalty for each year they missed.
Quiet disclosure – which involves filing the relevant information without alerting the IRS – is also a possibility if someone does not qualify for one of the above programs. However, this comes with many risks, and taxpayers should consult with a Rockville attorney about joining one of the other offshore disclosure programs before considering this option.
The value in consulting a tax lawyer is understanding where a taxpayer’s risk exists, including any criminal exposure, and navigating the disclosure carefully. A lawyer should assess the size of the accounts at issue, the taxpayer’s recent filing history, and their declared reasoning for the failure to file. When joining an offshore disclosure program, it is important for a Rockville taxpayer to write a narrative explaining why they were non-willful when they failed to file.
A lawyer could determine if a taxpayer’s narrative will be sufficient for the IRS to allow the disclosure. If there is evidence of willfulness or willful blindness, a tax professional may have to discuss other options that pose less of a risk to the taxpayer.
Once a determination has been made about which program to join, a taxpayer simply files the required returns with any other forms required by that disclosure.
If you are out of compliance with the IRS regarding your offshore financial assets, you could take advantage of their disclosure programs to reduce your exposure. The right legal counsel could ensure that you have met the criteria for your chosen program and covered all of your bases. If you have questions about joining an offshore disclosure program in Rockville, reach out to our law firm for trustworthy counsel.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Vienna, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.