Maryland Taxpayer with Offshore Accounts? Here’s What You Need to Know about FATCAHot Topics, News, Offshore Account Update
Posted in on October 30, 2020
For U.S. taxpayers who live in Maryland and have funds stored in offshore accounts, federal tax law compliance involves more than simply filing your annual income tax returns. Among various other requirements, ownership of offshore accounts triggers a requirement to comply with the Foreign Account Tax Compliance Act (FATCA). Failure to comply with FATCA can have serious consequences; and, in order to avoid substantial tax penalties, U.S. taxpayers who have offshore accounts need to ensure FATCA compliance with the help of an experienced Maryland offshore tax attorney.
5 Important Facts about FATCA for Maryland Taxpayers with Offshore Accounts
1. FATCA Imposes Reporting Obligations for U.S. Taxpayers
If you own offshore accounts, you have an obligation to report the assets held in these accounts to the Internal Revenue Service (IRS). The means for doing so is by filing IRS Form 8938. Failing to report your offshore accounts to the IRS is a violation of FATCA, and it can lead to the penalties discussed below.
2. FATCA Also Imposes Reporting Obligations for Foreign Banks and Businesses
In addition to imposing reporting obligations for U.S. taxpayers, FATCA also imposes reporting obligations for foreign banks and businesses that hold U.S. taxpayers’ offshore assets. Countries around the world have agreed to enforce FATCA’s reporting requirements; and, if a foreign entity reports offshore assets that a U.S. taxpayer does not, this is almost certain to lead to IRS scrutiny.
3. FBAR Compliance Does Not Establish FATCA Compliance
If you have offshore accounts, you may be familiar with the Report of Foreign Bank and Financial Account (FBAR). This is a report required under the federal Bank Secrecy Act, and which is required for U.S. taxpayers who own offshore accounts and other foreign assets. Importantly, FBAR compliance does not establish FATCA compliance. In order to avoid unwanted scrutiny, you must fully comply with both the Bank Secrecy Act and FATCA.
4. Non-Compliance with FATCA Can Lead to Substantial Penalties
As referenced above, non-compliance with FATCA can lead to substantial penalties. As summarized by the IRS, the penalties for FATCA non-compliance as follows:
“If you must file Form 8938 and do not do so, you may be subject to penalties: a $10,000 failure to file penalty, an additional penalty of up to $50,000 for continued failure to file after IRS notification, and a 40 percent penalty on an understatement of tax attributable to non-disclosed assets.”
The statute of limitations for FATCA enforcement is six years. In some cases, FATCA non-compliance can also lead to criminal prosecution for federal tax evasion.
5. U.S. Taxpayers Can Mitigate the Consequences of FATCA Non-Compliance Through Voluntary Disclosure
If you have failed to disclose your offshore accounts to the IRS in compliance with FATCA, you may be able to mitigate the consequences of your non-compliance through voluntary disclosure. However, before pursuing voluntary disclosure, you need to make sure you qualify, and it will be important for you to thoroughly assess your options with the help of an experienced Maryland offshore tax attorney.
Schedule an Appointment with Maryland Offshore Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group
Are you a Maryland resident? Do you have questions about FATCA compliance or voluntary disclosure? To discuss your situation with Maryland offshore tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, in confidence, call 240-235-5096, email firstname.lastname@example.org or request an appointment online today.Share This Post