IRS Continues Crack Down on Foreign Bank Account Reporting
Whether you have funds in an offshore account, generate foreign business revenue, or invest outside of the United States, your activities are likely to require special care and handling to stay in compliance with Internal Revenue Service regulations. If you have control of foreign income and you aren’t readily familiar with the acronyms FBAR, FACTA, OVDP, and SFCP, it’s time to seek professional assistance.
While your immediate impulse may be to turn to your CPA for clarification and advice on these complicated issues, consider getting legal counsel first. A well-versed international tax expert can work with you to confidentially assess any transgressions that may need remediation and build a strategy for getting into compliance with the law.
The discretion available through offshore accounts doesn’t extend to the IRS; they require reporting and they are serious about it. They are working hard to track down undisclosed foreign assets by increasingly leveraging data analytics and a variety of information resources. They’ve even endeavored to make it easier for those with a history of non-compliance to make things right. Since 2014, the IRS has provided amnesty from criminal prosecution and certain civil penalties for those who hadn’t previously complied with laws for reporting foreign assets through the Offshore Voluntary Disclosure Program (OVDP). On September 28 of this year, however, OVDP will be shuttered. That leaves just a couple weeks for non-reporters to comply with the law.
Where do you start? With the reporting tools covered by the OVDP. They include the Foreign Bank Account Report (FBAR) and the Foreign Account Tax Compliance Act (FACTA). These reporting and compliance laws apply to those who, for tax purposes, are U.S. citizens. That includes dual citizens, Green Card holders and American citizens living abroad. When a member of one of those groups has individually or jointly owned a foreign financial account, had signature powers or authority over an account or accounts in which the total exceeds $10 thousand at any point during the year, an FBAR is required. These groups have also had to comply with a host of additional stipulations as outlined in 2010’s FACTA.
The last day to submit an FBAR for the 2017 tax year is October 15, 2018, just a few weeks after the OVDP expires. Without OVDP to protect them, those who don’t file an FBAR or fail to comply with FACTA can face civil penalties, criminal penalties, or both in addition to a long list of other penalties.
For those who have been unaware of any filing requirements, a program similar to OVDP called the Streamlined Filing Compliance Procedure (SFCP) may offer amnesty.
If you suspect you may fit the criteria, it’s a good idea to check in with an attorney with international tax expertise.