Despite the ongoing frenzy of publicity threatening criminal prosecution against U.S. taxpayers with foreign accounts, it is not illegal for U.S. taxpayers to maintain financial accounts at foreign financial institutions. However, U.S. taxpayers with foreign assets must fulfill various reporting requirements under the Bank Secrecy Act and the Internal Revenue Code. To encourage taxpayers to report previously undisclosed accounts, the IRS implemented Offshore Voluntary Disclosure Programs in 2009 and 2011 that offered amnesty from criminal prosecution in exchange for an agreed-upon amount of tax, interest, and civil penalties.
The 2009 program marked the beginning of an effort by the IRS and the Department of Justice to collect taxes on unreported foreign income and establish future compliance. Under the 2009 program, taxpayers were required to disclose unreported income held in foreign accounts by filing amended returns and delinquent information reporting forms. By participating in the programs, taxpayers were given the opportunity to avoid criminal prosecution and obtain certainty regarding the amount of civil penalties that would be assessed for their previous failure to file. In exchange, participating taxpayers were required to prepare and submit amended returns for the most recent six years, pay all related tax, interest, and penalties on the previously unreported income, and pay a 20% miscellaneous civil penalty on the highest aggregate balance of foreign accounts during that six year period. The last day to submit documents for participation in the 2009 program was October 15, 2009.
Foreign Accounts and the IRS
After the period for participating in the 2009 program ended, the IRS subsequently implemented the 2011 initiative in a continued effort to collect taxes on unreported foreign income held at foreign financial institutions. The 2011 initiative mimicked the 2009 program in many ways, however, taxpayers were required to disclose eight years of unreported foreign income and the miscellaneous penalty was raised to 25% of the highest aggregate balance of foreign accounts during the eight year period. The last day to submit documents for participation in the 2011 program was September 9, 2011.
Though the terms of the 2012 program have not yet ended, new guidance was issued by the IRS on June 18, 2014 outlining new procedures that will become effective on July 1, 2014 and a new penalty structure for taxpayers with accounts at certain banks or with certain promoters that will become effective on August 4, 2014. These revised procedures are much more onerous than those of the 2009, 2011, and 2012 programs. However, there also new programs that provide some relief for taxpayers who are willing to certify that their actions were non-willful. Notably, taxpayers who have already initiated OVDP procedures under the 2012 program may be eligible for transitional treatment and reduced penalty structure.
Brown PC’s experienced team of tax professionals has successfully advised U.S. taxpayers with assets all over the world on their Offshore Voluntary Disclosure submissions and related reporting requirements. Though the IRS is still processing some of the disclosures that were submitted under these programs, the penalty percentages offered in the 2009 and 2011 Offshore Voluntary Disclosure Programs are no longer available. Nevertheless, there are still options for U.S. taxpayers with undisclosed foreign income and accounts.
Our Overseas Bank Account Lawyers Can Assist
If you live anywhere in the United States- Miami, New York, Denver, and Seattle – our overseas account compliance lawyers can assist you with any hidden bank issues currently being addressed by the IRS. This includes overseas retirement accounts, superannuation accounts and inherited foreign accounts. For more information or to schedule a consultation to discuss how Brown, PC can help you with offshore account compliance issues, please contact the firm at 817-870-0025 or toll free at 888-870-0025.