The Internal Revenue Service (IRS) recently announced the impending end of the Offshore Voluntary Disclosure Program), scheduled to end September 28, 2018. Generally, the type of people that need to report these assets can be categorized into one of three groups:
- Unimpacted. The Internal Revenue Service (IRS) has reporting requirements, including a minimum value for reportable assets. Those who have an interest in foreign assets with little value likely belong to this first group. As such, they may have gotten away with a failure to disclose the assets, but they would not likely owe a tax or penalty.
- Disclosure violators. These individuals likely violated the disclosure requirements unaware and have, thus far, avoided meeting their tax obligation and paying any fine for the violation.
- Hoodlums. As noted in a recent piece in Forbes, there are also the “scoundrels” that use secret off-shore accounts to intentionally avoid tax obligations.
Regardless of the group one may align with, it is wise to review all foreign assets and come into compliance before the upcoming September date.
What type of reporting does the IRS require? The government requires submission of the Report of Foreign Bank and Financial Accounts (FBAR). Those who have ownership or signature authority over a foreign asset that, at any point during the applicable tax year, had a value over $10,000 are required to file an FBAR.
The IRS may require additional filings such as forms to report foreign trusts and gifts.
What type of penalties can apply? The severity of penalties depends on a number of factors. Those who mistakenly neglected to file will likely face financial penalties. In contrast, if the IRS considers the failure a willful violation of tax laws the alleged offender could also face prison time.