No More Hide ‘N Seek For Taxpayers Overseas Assets
As most taxpayers who work with Taxation Solutions know, we typically work with the underdogs, those people who get into IRS trouble because they can’t pay. However, from time to time, we also deal with very high net worth individuals and corporations.
Occasionally we get clients who have not filed or paid taxes in several years.
And, sometimes, these are high net worth individuals attempting to disguise themselves as low income taxpayers. These are people who might even be hiding assets overseas. This article is addressed to these unorthodox people. If you’re not one, but you know someone who is, please invite them to read this article! Because if they haven’t already made themselves known, the jig is up.
IRS Is Ending Its Offshore Voluntary Disclosure Program
The IRS is ending the Offshore Voluntary Disclosure Program (OVDP) this September 28th. This program has given U.S. taxpayers an opportunity to come forward with ‘previously undisclosed foreign income, accounts or assets with the promise and certainty that they will not face criminal prosecution. Since the program’s inception in 2009, over 56,000 US taxpayers have paid over $11.1 billion in back taxes, interest, and penalties through the OVDP, but the number of participants has steadily declined over the past few years – from 18,000 in 2011 down to only 600 in 2017.
What Happens When The OVDP Door Closes
The answer to the question of what happens once the OVDP door closes can be summed up in one word: Prosecution.
The IRS is known to be very aggressive in its pursuit of offshore accounts. It has also been very good over the years at publicizing both the requirement to report income and foreign assets and the availability of the OVDP. With the ending of the grace period the IRS has made possible, once the September 28th deadline arrives, it will be difficult for taxpayers to argue that their failure to comply with reporting obligations was unintentional. If they are found out, the behavior will go down as criminal.
The High Price Of Getting Caught
For willful violations, the Foreign Bank Account Report (FBAR) penalty is the greater of $129,210 (adjusted for inflation) or 50 percent of the high balance in the account(s) at the time of the violation. For each year that an FBAR is not filed, the penalty may be assessed again, for up to six years. This is the case even if no taxes were due on those accounts.
Criminal penalties for FBAR noncompliance include fines of up to $500,000 and up to 10 years in prison. However, the IRS can adjust the penalties up or down depending on a variety of circumstances.
What can I say? Eventually it gets old trying to hide assets and income from the IRS. If a taxpayer has the money, it makes more sense to pay what is owed than chance getting caught and paying so much more. But, then again, I suppose the chase is part of the thrill for some people!
If you are an otherwise law-abiding taxpayer who for whatever reason have failed to file or pay your taxes, give our offices a call. We work with the IRS on behalf of our clients and typically bring IRS troubles to an end along with a great sense of relief for our clients.