In recent years, United States taxpayers experienced a paradigm shift when the government began focusing on enforcing the rules of international reporting. While failure to pay or report income tax has always been a problem, recently, there has been increased emphasis on reporting foreign income, assets, investments, bank accounts and gifts. Not reporting the required information can result in severe penalties and potentially criminal exposure.
Hone Maxwell LLP International Tax & Business attorneys are well versed and experienced in the various amnesty programs and procedures offered by the IRS to assist taxpayers who are delinquent in reporting and paying taxes. HMLLP attorneys have a successful track record of enabling clients to avoid penalties by helping them navigate the IRS’ amnesty programs, including streamlined filing compliance procedures.
The U.S. began prioritizing reporting and enforcement following the passage of several new anti-crime laws, including the Foreign Account Tax Compliance Act (FATCA), which took effect in 2010. While FATCA’s stated goal is to protect U.S. consumers from white-collar criminals and terrorists, it created a requirement for foreign banks to report U.S. taxpayers’ holding accounts. This gives the IRS the information needed to ensure that taxpayers report these accounts. HMLLP attorneys are leading authorities on FATCA compliance for individuals, especially as it relates to the unique situations in Asia, Mexico and other countries, helping to navigate the Act’s broad gray areas and burdensome reporting and penalties.
Although the Offshore Voluntary Disclosure Program has closed, the standard Voluntary Disclosure program is still available. While this program provides criminal protection, it still subjects the taxpayer to maximum penalties and unlimited civil exposure. Therefore, it is typically used only when there is the possibility of a criminal investigation.
Streamlined Filing Compliance Procedures
The streamlined procedures are an incredible program for taxpayers that fit the criteria. In some situations, taxpayers can become current on their taxes and international filings without any penalties.
Delinquent FBAR Reporting Procedures
The Delinquent FBAR Reporting Procedures allow taxpayers to file FBARs late without penalties if there is no unreported income. This program is a great option when there is only signature authority. Also, there are other creative ways to combine it with other filing options and protect taxpayers from more severe FBAR penalties.
Reasonable cause has always been a filing option. If accepted, there are no penalties; however, it is a very high threshold for taxpayers to prove they meet the standard.
Quiet Disclosure/“Doing it Right” Going Forward
In the past, quiet disclosure – filing taxes without using a designated program – was a reasonable option. Now, it is rarely a good decision. More likely, quiet disclosure or fixing things in the current year is nothing more than giving the IRS a summary of all past non-compliance for review.