Estimated Time to Read: 3 minutes
The Tax Man
Remember that old saying, “Nothing is certain except for death and taxes”? There’s a great degree of truth in it, and, just like you can’t escape death, you also can’t escape the tax man (or woman!). Failing to report income and assets can result in large penalties, and sometimes even criminal prosecution. Remember that other saying, “You can’t escape the IRS”? Imagine the plotline of Final Destination, but with taxes. Scary stuff, right?
That’s why it’s extremely important to stay current with your tax returns – and honest. But if you’ve been less-than-current (and maybe a little less-than-honest) reporting your foreign income and/or assets, you’ll want to talk to an international tax consultant right away. The IRS currently offers programs designed especially for people who have failed to report foreign accounts and foreign assets, including the Offshore Voluntary Disclosure Program (OVDP) and the IRS’s recent introduction of streamlined procedures.
The Nitty Gritty
In an effort to encourage U.S. taxpayers to come into compliance with the requirements and stipulations of reporting foreign income and assets, the IRS recently announced Streamlined Filing Compliance Procedures. These procedures require U.S. taxpayers to file their original or amended tax returns (non-residents must file the original documents; residents can file amended returns), and they come with a variety of benefits. For one, all penalties will be waived under the new streamlined procedures for eligible U.S. taxpayers living outside of the U.S., whereas eligible taxpayers who are residing in the U.S. will face a reduced and very minimal penalty (the only penalty under the streamlined procedure is a miscellaneous offshore penalty, which equals approximately 5% of the foreign financial assets that are in violation of U.S. tax compliance laws).
Yet, while the recently introduced streamlined procedures may seem like a dream (albeit, a very boring dream full of numbers and small brackets and detailed instructions), they do not offer protection from potential criminal prosecution, nor do they limit the number of civil penalties that may be incurred from failing to report foreign income and assets. If you’re unsure of your options, you will definitely want to book an appointment with an international tax consultant because he or she will be able to provide you with sound and clear advice regarding which path you should take. It’s also important to consult with a tax specialist because he or she will be able to warn you of potential penalties and will counsel you to choose the right path for your international income reporting.
The Nittier Grittier
The Offshore Voluntary Disclosure Program is designed to encourage taxpayers to disclose previously undisclosed offshore assets. As the IRS’s website explains, the OVDP offers “taxpayers with undisclosed income from offshore accounts another opportunity to get current with their tax returns.” And, while the penalties associated with the current OVDP has a higher penalty rate than previous programs, it offers taxpayers a clear opportunity to disclose foreign accounts rather than risk the detection of the IRS and even possible criminal prosecution.
The OVDP is designed for people who intentionally did not report all of their foreign income or assets. In order to be eligible, the applicant’s assets or monies must have been obtained legally, the applicant must not have made a submission to a streamlined procedure, and the applicant must not be under civil or criminal investigation by the IRS. In order to meet the requirements of the OVDP, participants must file or amend up to eight years of tax returns and FBARS, complete various questionnaires, and pay back all taxes, interest, and penalties owing (penalties range between 27.5% to 50%) on highest value of unreported assets. The good news? In exchange for taking part in the OVDP, any non-compliance older than eight years is forgiven. The best part? You won’t be criminally prosecuted. In other words, you won’t go to jail.
On the Record
If you are out of compliance with IRS tax law, one thing is for certain: you need to somehow get back into compliance with IRS tax law. And, while doing a google search on the penalties and fines associated with IRS tax law incompliance will pull up a veritable horror show of worst-case scenarios, a lot of the information you’ll find online on international tax compliance won’t be 100% accurate. If you want to find out more about the differences between the OVDP and a streamlined procedure, contact an international tax specialist without delay. Catch up with the IRS before they catch up with you!
- Small Business Tax Accountants and Tax Tips Bravery and resilience should be commended Running a small business in the current environment of...
- How the Expat Tax Can Affect You? When you are moving to another country, or planning to move to another country you...
- RWG www.articles.howto-tips.com/How-To-do-things-in-2019/backyard-waterfall-kit-%E2%80%93-what-makes-one-all-kit-so-demanding Backyard Waterfall Kit – What Makes the One-in-All Kit So Demanding? jeff231.livejournal.com/275118.html www.openarticles.com/article.php?title=Why-Prefer-Having-Backward-Waterfall-Kit-and-NOT-Conventional-Ones?-By-Sean-Erik&article=524141 www.articles.studio9xb.com/Articles-of-2019/small-pond-filter-why-should-you-invest-updated-version...