In 2010, the IRS instituted FATCA the Foreign Account Tax Compliance Act to ensure taxpayers and banks and financial institutions fully disclose the extent of the financial assets they hold abroad. Non-compliance could mean penalties that are more than the unreported foreign assets. The bottom line: offshore tax collection is a government priority that is here to stay and if you have offshore tax problems, you need expert tax resolution help.
A recent Forbes article by Robert Wood titled: “IRS has Gone Wild Over FATCA but Watchdog Warns of Compliance Glitches”, cites a new government report that showed taxpayer data exchanges the IRS is sharing reciprocally with other countries has inefficiencies and may not be as far along in ramping up FATCA as it would like.
Wood notes that a key part of FATCA is compliance by banks and other financial institutions. Foreign banks are required to reveal Americans with accounts over $50,000. Non-U.S. banks found non-compliant could face stiff penalties such as withholding 30% on most transactions. A non-compliant taxpayer is not immune and can be subject to equally stiff penalties and prosecution:
- A $10,000 failure to file penalty.
- An additional penalty of up to $50,000 for continued failure to file after IRS notification.
- A 40 percent penalty on an understatement of tax attributable to non-disclosed assets.
The new Treasury Inspector General report suggests that the IRS may not be as far along in ramping up FATCA as it would like. This report recommends the Agency to make required improvements to better compliance and efficiency in the reporting of offshore income and assets. Update the compliance activities in the FATCA Compliance Roadmap for identifying noncompliance by foreign financial institutions. Here are the three top FATCA compliance recommendations:
1. Initiate a periodic quality review process for the processing of paper Forms 8938 to ensure the accuracy of the data being transcribed.
2. Ensure that the transcription issues identified in this report are addressed in the newest version of the Form 8938 transcription program.
The only way to resolve offshore tax issues is to come clean with the IRS AND TO HAVE EXPERT REPRESENTATION. You don’t go to court without a lawyer do you? Well, you can’t tackle the IRS without an expert tax resolution professional to represent you in front of the IRS.
If you or someone you love has undisclosed and unresolved offshore tax issues, it’s time to consult with an experienced New England tax resolution specialist who can help you get back into compliance. This tax professional knows the proper disclosures and required FBAR reports and will amend your tax return accordingly for you to avoid the stiff penalties. However, these matters must be handled NOW to get a more favorable treatment from the IRS and also to set you on a better path toward permanent tax relief.