Offshore Account/Foreign Bank Account Reporting
Contrary to current popular belief, it is not illegal to have foreign bank accounts. In fact, there are many legitimate reasons for U.S. taxpayers to maintain foreign accounts.
Recently, however, a spotlight has been placed on U.S. taxpayers who have previously not disclosed their foreign accounts to the government. These taxpayers have been forced to reconsider their decisions not to disclose or report income from those accounts as public attention became focused on the U.S. government’s crackdown on the use of offshore accounts to evade U.S. tax liabilities. In a very public campaign, the Internal Revenue Service and the United States Department of Justice (“DOJ”) have been aggressively pursuing taxpayers they believe are hiding income in offshore bank accounts in an effort to avoid paying income tax.
The most widely publicized example of the government’s efforts on this front is the government’s case against Swiss banking giant UBS. According to DOJ estimates, as many as 52,000 U.S. customers could be using UBS accounts as tax shelters.
Holders of bank accounts at other offshore banks are not necessarily safe either, as reports have surfaced of an expanded inquiry by the IRS into offshore banking services provided to customers of numerous other foreign banks.
Individual taxpayers who file U.S tax returns, and who have any offshore or foreign accounts must report income from these offshore accounts on their income tax returns. They must also declare any offshore or foreign bank accounts over which they have signatory authority, regardless of whether they receive any income from the account.
Taxpayers are required to report information identifying their foreign accounts by filing a Form TDF 90-22.1, Report of Foreign Bank and Financial Accounts, - more commonly known as an FBAR - no later than June 30th. Anyone with an offshore account bank account who doesn't file an FBAR can be hit with both criminal tax penalties, and civil tax penalties. Sometimes these forms can seem overwhelming or complicated. A IRS lawyer at Thorn Law Group can help you navigate the nuances of each tax form to ensure you have completed it correctly.
In an effort to encourage taxpayers with offshore accounts to come into compliance, the IRS has offered another amnesty settlement initiative that started on January 9, 2012. Therefore, taxpayers with undisclosed foreign accounts and/or unfiled disclosure forms can still come forward and apply for the latest IRS Amnesty Program.
At Thorn Law Group, we are experienced at representing taxpayers with all issues related to offshore and foreign bank accounts. Whether it is substantiating your compliance in an audit, helping you to determine your reporting responsibilities or assisting you as you come into compliance, a tax lawyer at Thorn Law Group has the national and international tax law experience and is well positioned in to represent your case before the IRS.
This is an area of ongoing activity by the IRS and the Department of Justice. Check out the Blog and News & Events for the latest developments.