In recent years, the Internal Revenue Service (IRS) and the Department of Justice (DOJ) have aggressively pursued taxpayers with undeclared offshore assets and accounts. This crackdown is part of a global effort to combat tax evasion and improve transparency in financial transactions. If you have an offshore account, it's integral to be aware of the potential consequences and take action to avoid penalties and criminal charges.
The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act to target U.S. taxpayers with financial accounts outside the United States. FATCA aims to prevent tax evasion and improve compliance with U.S. tax laws. FATCA requires foreign financial institutions to report information directly to the IRS regarding offshore accounts owned by U.S. taxpayers. In addition, U.S. taxpayers with a reporting obligation are required to file an annual Report of Foreign Bank and Financial Accounts (FBAR) if the value of their offshore accounts exceeds $10,000.
The penalties for failing to comply with FATCA and other reporting requirements can be severe. The IRS can impose civil penalties of up to $10,000 per violation for failure to file FBARs, and up to $50,000 for willful violations. In addition, criminal penalties can include fines of up to $250,000 and imprisonment for up to five years.
To avoid these penalties, taxpayers with offshore accounts should take steps to come into compliance with U.S. tax laws. The process of coming into compliance can be complex, and it's important to seek the guidance of a qualified tax attorney.
At The Wilson Firm, our tax lawyers have experience helping clients navigate the complex world of offshore account reporting and compliance. We can assist you in determining the best course of action for disclosing your offshore assets based on your particular facts and circumstances. We'll work with you to minimize the risk of penalties and criminal charges and ensure that you comply with all applicable U.S. tax laws.