You can generally disclose your offshore accounts as long as the IRS has not begun an examination or criminal investigation into your non-compliance. However, you lose this ability if the IRS starts an examination, even if the examination isn’t related to your foreign accounts.
The general statute of limitations for FBAR penalties is six years, but the IRS may be able to go back further in some cases. Talk to a tax attorney if you have many years of undisclosed foreign accounts and want to protect yourself from potential criminal prosecution.
Streamlined Procedures Disclosure Period
The disclosure period for the Streamlined Procedures is up to six years. You’ll be required to submit six years of FBARs if you choose to use this procedure.
However, you’ll only need to submit three years of amended tax returns, along with all required information returns.
Domestic taxpayers will also need to submit a 5% miscellaneous offshore penalty. In addition, you must remit the full amount of tax and interest due in connection with these filings, which could include taxes due on income from your foreign accounts.
Offshore Disclosure Rules
The new Offshore Disclosure Rules also have a six-year disclosure period. This requires six years of tax returns and six years of FBARs and other required information returns.
The examiner does have the discretion to extend the disclosure period if you fail to cooperate and the case is not resolved by agreement. You could also face the maximum penalties allowed by law in these cases.
Risks of Waiting to Disclose
The biggest risk of waiting to disclose your accounts is that the IRS begins an examination or investigation into your affairs. Once this happens, you lose the ability to voluntarily disclose your non-compliance, and you could face the full array of criminal and civil penalties, including possible jail time for the failure to file FBARs.
There is also the possibility that the IRS changes the disclosure rules or eliminates existing offshore disclosure programs. This occurred near the end of 2018, when the Offshore Disclosure Program was ended and the new Offshore Disclosure Rules were enacted.
If you have any concerns about undisclosed offshore accounts, contact a tax attorney to talk about your options.
Get help with offshore disclosure matters by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.