The United States Tax Code requires taxpayers disclose certain income and assets. In some cases, this extends to include foreign assets and accounts. As discussed in a previous post, available here, the Internal Revenue Service (IRS) and Treasury Department generally expect taxpayers to fill out a special form if the foreign bank account has over $10,000 at any point during the tax year.
This form is the Report of Foreign Bank and Financial Accounts (FBAR). The federal government expects taxpayers, including individuals, businesses, and trusts who qualify to file this form.
But what happens if you forget? Could the federal government send you to jail?
The answer will depend on a number of different factors, but one of the big things the courts generally look for when analyzing allegations of tax crimes like this is the taxpayer’s intent. Was the failure to file a willful violation or an honest mistake? If the government can establish that the taxpayer’s failure to file was intentional, then it can likely pursue criminal charges instead of just civil penalties.
If the government is successful, a conviction for criminal charges can include a $250,000 fine and up to 5 years imprisonment or, if the government can show the taxpayer also violated certain other laws, a $500,000 fine and up to 10 years imprisonment.
What should I do if I get a notice from the IRS?
First, those who are concerned they may not have filed the proper paperwork can mitigate the risk of criminal charges. An attorney experienced in this area of law can discuss your options.
If you get a letter from the IRS or other federal agency questioning your tax filings, it is important to take it seriously. Do not ignore it. It will not go away. Instead, the issue could build into an even more difficult to manage problem. Look over the letter to see what the government is asking for. If you are confused or concerned about potential penalties, reach out to a qualified attorney.