The IRS makes major changes to its offshore
disclosure procedures to encourage U.S. taxpayers with foreign financial assets
to comply with their tax obligation. On June 2014, the IRS announced major
changes to its offshore compliances as an alternative to its existing Offshore
Voluntary Disclosure Program (OVDP), which was designed more for taxpayers who
willfully failed to disclose foreign assets.
Specifically, Streamlined Filing Compliance Program (SFCP) is intended
to cover individual taxpayers who non-willfully failed to disclose foreign
assets (e.g., they did not know about the requirement or their ownership
interest in foreign assets). If you are a
U.S. taxpayer and you have undisclosed foreign bank accounts and or unreported
foreign income, then under FATCA (Foreign Account Tax Compliance Act) and IRS
general tax law, you may be subject to extremely high penalties according to
the Reporting of Foreign Bank and Financial Account Rules. Voluntary compliance
programs providing new options to help thousands of people to comply with their
U.S. tax filing obligations. Taxpayers’ non-U.S. income and investments vary
widely, the IRS offers the following options for addressing previous failures
to comply with U.S. tax and information return obligations: • The Offshore Voluntary Disclosure Program (OVDP) • Streamlined Filling Compliance procedures (SFCP) • Delinquent
Report of Foreign Bank and Financial Accounts (FATCA/FBAR) and delinquent
international information return submission procedures The key aspect of Streamlined Filing Compliance Procedures is an expansion of the non willful certification program for taxpayers residing in the United States or foreign country whose failure to report foreign financial assets and pay all tax due on those assets was not the result willful conduct are subject to only a 5% miscellaneous offshore penalty on the maximum value of the highest annual aggregate total balance going back 6 years. At the other end of the spectrum, if a person was willful, which generally means they intend on defrauding the Unites States by evading tax, then they have to enter the traditional OVDP (Offshore Voluntary Disclosure Program) and pay a penalty of either 27.5% or 50% miscellaneous offshore penalty on the maximum value of the highest annual aggregate total balance going back 8 years. Taxpayers with
undisclosed foreign accounts or entities should make a voluntary disclosure
because it enables them to become compliant, generally avoid substantial civil penalty
and eliminate the risk of criminal prosecution. Making a voluntary disclosure
also provides the opportunity of resolving all offshore tax issues. Taxpayers who
do not comply voluntary disclosure run the risk of detection by the IRS and the
imposition of substantial penalties, including the fraud penalty, foreign
information return penalties and the risk of criminal prosecution. Bowery Expatriate Tax Group Inc © 2016 All Rights Reserved. |