Amnesty Programs & Noncompliance Options
In recent years, United States taxpayers experienced a paradigm shift when the government began focusing on enforcing the rules of international tax reporting. While failure to pay or report income tax was always a problem, recently, there is 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 international tax and business 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 international tax 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.
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.
The Delinquent Report of Foreign Bank and Financial Accounts (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.
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.
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Foreign investors: Learn about options for opening a business and tax compliance in the U.S.
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Why repatriating profits to the U.S. can be more beneficial, provide a clear picture on how nearshoring can facilitate that process and show the benefits to U.S. investment.
You should consult an international tax attorney before filing amended returns or submitting late forms. The IRS offers several compliance and disclosure options, and choosing the wrong approach can increase your risk of penalties.
Yes. Many taxpayers discover years later that they were required to report foreign income, offshore accounts, foreign corporations, or other international assets. Various IRS compliance programs may help eligible taxpayers become compliant.
The IRS offers several options for addressing offshore reporting issues, including Streamlined Filing Compliance Procedures, delinquent international information return submissions, reasonable cause disclosures, and other corrective filing strategies depending on the facts of the case.
Failure to address international tax noncompliance can lead to significant penalties, interest, audits, and enforcement actions. With FATCA and international information-sharing agreements, foreign financial accounts are increasingly visible to the IRS.
In some situations, taxpayers may qualify for reduced penalties or penalty relief. Eligibility depends on factors such as intent, filing history, compliance efforts, and the specific reporting failures involved.
The Streamlined Filing Compliance Procedures program allows certain taxpayers who failed to report foreign income or foreign assets non-willfully to correct past filings and potentially reduce penalties while becoming compliant with U.S. tax laws.
The best compliance option depends on your specific facts, reporting history, foreign assets, and potential exposure. An international tax attorney can evaluate available disclosure options, identify risks, and develop a strategy designed to achieve compliance while minimizing penalties.