The U.S., and in some cases California, taxes income on a worldwide basis. Therefore, if you are a citizen, resident, or deemed resident of the U.S., your income is taxed regardless of where it is earned or where you are living when it is earned. In addition to taxing worldwide income, extensive reporting is required on foreign activities, which may not be required for similar activities within the U.S. If you have assets, bank accounts, income, or business activities outside of the U.S. it is imperative you understand your filing and reporting obligations.
In recent years, foreign income and activities have become one of the top priority issues for the IRS as they attempt to crack down on taxpayers failing to disclose or improperly reporting these assets and activities. The focus has resulted in increased audits, additional scrutiny of international transactions, and increased penalty assessments and criminal prosecutions for failing to properly report such assets and / or activities. Additionally, in certain circumstances, if a taxpayer fails to file even one required information report with their income tax return the statute of limitations will never begin to run on that return meaning it is open to IRS scrutiny indefinitely.
The IRS currently has programs available to taxpayers who have previously failed to comply with their filing obligations related to foreign assets and / or transactions. If you have not been in compliance in the past, you may be able to take advantage of one of these programs depending on your specific facts and circumstances. Although these programs do not yet have a closing date, they very likely are temporary so you must act immediately. As foreign banks worldwide continue to share information with the U.S. government, this will continue to be a top priority for enforcement by the IRS. Do not wait and risk significant financial penalties and criminal prosecution, contact Hone Maxwell LLP today for an assessment of your situation.