• Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us
  • Facebook
  • Google+
  • Linkedin
  • Savvy
  • Twitter
  • Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us

Blog Post

IRS Aims to Ground More Offshore Accounts

10 Feb 2015
Comment are off
MBA Site Administrator
Offshore Accounts in St Petersburg Florida

Despite reduced resources due to recent budget cuts, the IRS is continuing its efforts to deter illegal tax evasion schemes. Instead of announcing its annual list of the “Dirty Dozen” tax scams for 2015 in one fell swoop, the agency is issuing a press release for each one spanning twelve days. One primary scam identified by the IRS is the practice of hiding money or assets in unreported offshore accounts.

What’s a FBAR?

As authorized by the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department, a U.S. person is required to file a Report of Foreign Bank and Financial Accounts (FBAR) if:

  • He or she has a financial interest in or signature authority over at least one financial account located outside the United States; and
  • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

For this purpose, a “U.S. person” includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under U.S. laws, and trusts or estates formed under the U.S. laws.

The FBAR must be filed no later than June 30 of the following calendar year. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s BSA E-Filing System. It’s not filed with your federal tax return. Your tax adviser can provide more details.

“The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore,” said IRS Commissioner John Koskinen in the press release. “Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order.”

To help facilitate cooperation among taxpayers, the IRS has created the Offshore Voluntary Disclosure Program (OVDP). It recently expanded streamlined procedures and added other modifications to the program to encourage more tax dodgers to use it.

Background Information

The first Offshore Voluntary Disclosure Program (OVDP) was initiated in 2009. Since that time, it has produced more than 50,000 disclosures and the IRS claims to have collected more than $7 billion from the initiative. In conjunction with the disclosures, the IRS has conducted thousands of offshore-related civil audits, producing tens of millions of dollars. Additionally, the IRS has pursued criminal charges against individuals who evade taxes using unreported offshore accounts, leading to billions of dollars in criminal fines and restitutions.

Under the OVDP, taxpayers are required to file all original and amended tax returns, as well as information returns such as the Report of Foreign Bank and Financial Accounts, commonly known as the FBAR (see sidebar at right). The program imposes payment for back taxes and interest for up to eight years in addition to any other applicable IRS penalties relating to accuracy and delinquency. Installment payments or an arrangement under an “offer in compromise” may be available to certain taxpayers.

Following the launch of the current program in 2012, the IRS announced several changes in the OVDP last year, expanding its streamlined procedures and adding other modifications.

1. Expanded Streamlined Procedures. Expanded procedures are available to a wider range of taxpayers living both inside and outside the country. The key changes include the following:

  • Elimination of a requirement that the taxpayer have $1,500 or less of unpaid tax per year;
  • Elimination of the required risk questionnaire;
  • Requirement for taxpayers to certify that previous failures to comply were due to non-willful conduct; and
  • Penalty waiver for eligible taxpayers residing outside the United States.

For eligible taxpayers residing in the United States, the only penalty that will be assessed is a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that triggered the tax compliance issue.

2. Additional Modifications. The IRS also implemented several other important modifications to the OVDP. Key changes include:

  • Additional information requirements from taxpayers applying to the program;
  • Elimination of the existing reduced penalty percentage for certain non-willful taxpayers in light of the expansion of the streamlined procedures;
  • Requirements for taxpayers to submit all account statements and pay the offshore penalty at the time of the OVDP application;
  • Acceptance of electronic records submission, rather than just paper records submission; and
  • An increase in the offshore penalty percentage from 27.5 percent to 50 percent in cases when it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or U.S. Department of Justice (DOJ).

IRS Zeroes in on Scams

In recent years, offshore accounts are increasingly being used to lure taxpayers into illegal scams and schemes. In particular, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, and private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The nation’s tax collection agency works hand-in-hand with the DOJ to prosecute tax evasion cases.

Although there may be legitimate reasons for maintaining financial accounts abroad, the IRS points out that certain reporting requirements still need to be met. U.S. taxpayers who maintain such accounts and do not comply with the reporting requirements are breaking the law. Thus, they risk significant penalties and fines — even the possibility of criminal prosecution.

Coming Clean

Since the inception of the OVDP in 2009, tens of thousands of individuals have voluntarily disclosed their foreign financial accounts. This has enabled them to take advantage of special opportunities within the U.S. tax system and resolve their tax obligations. With new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become even more difficult. Contact your tax adviser if you are interested in the OVDP or have questions about it.

 

© Copyright 2015. All rights reserved.
Brought to you by: McClanathan, Burg & Associates, LLC

About the Author
McClanathan, Burg & Associates, LLC. is a full service accounting firm. Our team members provide services including: Tax, Audit, Assurance and Accounting, Estate and Trust, Forensic Accounting, Litigation Support and Business Valuation.

Social Share

  • google-share

Search

RECENT NEWS

  • IRS Extends the Tax Filing and Paying Deadline for Individuals
  • Do you know the tax impact of your collectibles?
  • Making 2017 retirement plan contributions in 2018
  • When an elderly parent might qualify as your dependent
  • AMT Calculations: It’s Showtime

Categories

  • MBA Events
  • MBA News
  • Opinion & Editorial
  • Resources & Tips

Archives

  • March 2021
  • February 2018
  • January 2018
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • November 2013

Social Media

Facebook
Linked In
SavvyCard
Twitter

“Best
Congratulations to this year's honored business!
Featured in the Tampa Bay Times.
Click here to view my profile >>

Categories

  • MBA Events
  • MBA News

Archives

Sign Up For Newsletter

First Name:
Last Name:
Email Address (required):
Company:
Phone Number:
© 2014 McClanathan, Burg & Associates, LLC | Website Design by ThinkTankConnect.com

Send to Mobile

Text or Email McClanathan, Burg & Associates online business card to your mobile device using the form below
From the card you will be able to:
  • Get turn by turn directions to the company's office
  • Access a visual company directory of employee cards
  • Call, email or text the company
  • Share/Refer the company to others
  • Save the card to your phone's home screen for future access