The Consequences Of Unreported Foreign Assets And Accounts

Why Worry About Unreported Foreign Assets Or Accounts?

United States citizens, residents — including green card holders — and certain other qualifying people must report their worldwide income and disclose any financial interest, whether direct, indirect or merely signature authority, in a foreign bank account, brokerage account, mutual fund, trust or other type of foreign financial account, if the aggregate value of those accounts exceeds $10,000 at any time during the year. Even if their interest is only as a signature authority over a foreign account or other comparable authority, they must comply with the Bank Secrecy Act by electronically filing Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (the current FBAR form) formerly Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). Failure to file the FBAR may result in criminal prosecution, along with the imposition of severe penalties, some as high as 75 percent or even more than 100 percent of your foreign account balance. Such people are also required to disclose the existence of such accounts and any foreign income on their U.S. individual tax returns.

What If Foreign Accounts Have Not Been Disclosed?

Timely and accurately complete a voluntary disclosure by participating in the IRS Offshore Voluntary Disclosure Program while there is still an opportunity, and thereby mitigate the risk of an international tax audit and criminal prosecution. To find out how to minimize the risk of being criminally prosecuted for undisclosed offshore accounts or how to reduce the associated penalties, please call our experienced tax attorneys now.

What Is The IRS Offshore Voluntary Disclosure Program (OVDP)?

The IRS is in its fourth iteration of the Offshore Voluntary Disclosure Program (OVDP). The OVDP is designed to bring money held in foreign accounts back into the U.S. tax system and to help taxpayers with income from offshore accounts comply with federal tax law. While there are legitimate personal and business reasons for having accounts or assets outside of the United States, it is incumbent on the taxpayer to comply with reporting requirements and pay the required tax on money the foreign accounts earn.