Offshore Accounts and Taxes
U.S. taxpayers must report their worldwide income on their tax returns. Due to our government’s need to increase revenue, the IRS is actively searching for violators. When caught, the penalties for failing to disclose can be harsh, ranging from huge penalties, interest, and fines to imprisonment, as well as potentially losing the right to vote, cancellation of professional licenses, loss of employment, or forfeiting the right to bear arms. The rules are virtually the same for US citizens and resident aliens whether living in the United States or elsewhere.
The IRS also requires taxpayers to declare whether they have investment or foreign bank accounts. This stipulation includes, but is not limited to, foreign bank deposits or checking accounts and offshore brokerage accounts.
What Has Changed
An Interim Guidance Memo published by the IRS in November 2018 closed its Offshore Voluntary Disclosure Program (OVDP). This allowed taxpayers to report any undisclosed foreign bank accounts and receive immunity from potential criminal charges. Among the new voluntary disclosure guidelines include:
1. A taxpayer requirement to provide far more information than they did under the OVDP,
2. More tax years becoming subject to examination than under the OVDP,
3. The mandatory levying of a civil fraud penalty under Internal Revenue Code Section 6663 or section 6651(f),
4. Replacing fixed miscellaneous offshore penalties with penalties that conform to existing IRS guidelines, and
5. Providing taxpayers the right to appeal financial impositions related to a voluntary disclosure.
This article’s content serves as a brief overview. Should you have any questions, contact our office. If you are a client of ours, you are welcome to unlimited free tax planning advice from a member of our staff.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information call 661-259-1967 or visit www.scvprotaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax planning advice to their clients.
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