Despite the ending of the Offshore Voluntary Disclosure Program (OVDP), the IRS continues to enforce the reporting requirements for offshore accounts. Foreign Bank Account Reports (FBAR) and other information returns must be filed, or taxpayers may face stiff penalties.
Taxpayers with overseas bank accounts still need to make sure they are doing the following:
- File FBARs, Form 8938, and report foreign income on your tax return.
- If you failed to file an FBAR in a previous year, look into your offshore disclosure options.
New Offshore Disclosure Rules
Shortly after the closing of the OVDP, the IRS released a new offshore voluntary disclosure framework. The new rules are different from the OVDP in several key areas:
- The disclosure period has been reduced from eight years to six years in most cases.
- Willful FBAR penalties can be assessed as part of the new framework.
- The penalty structure is more flexible and could lead to vastly different outcomes for different taxpayers.
However, the new offshore disclosure rules still provide immunity from criminal prosecution for a willful failure to file FBARs. Taxpayers whose noncompliance was non-willful can use other offshore disclosure strategies.
Non-Willful FBAR Violations
Non-willful FBAR violations can still lead to penalties of up to $10,000 per undisclosed account. However, you can disclose your unreported accounts now to avoid the risk of these penalties.
The first option you can consider is a quiet disclosure. This involves sending in the delinquent FBARs with an explanation for the late filing. There are no penalties if you disclosed all of your foreign income on your tax returns.
The second option is to use the Streamlined Filing Compliance Procedures. You’ll have to amend your tax returns for up to three years and submit up to six years of delinquent FBARs. A 5% miscellaneous offshore penalty will be charged in lieu of FBAR penalties and other tax penalties.
As we’ve seen with the elimination of the OVDP, your offshore disclosure options can be changed at any time. Regardless, you can expect that the IRS will continue to enforce FBAR compliance and seek out taxpayers with unreported offshore accounts.
Get help with IRS foreign bank account problems by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best offshore disclosure strategy for your case.