With the latest IRS Crackdown
Undisclosed Offshore Accounts are being hunted down with FBAR (Foreign Bank Account Reporting) information requests of U.S. Taxpayers suspected of hiding assets in the wake of the UBS AG fallout and IRS Offshore Settlement Initiative.
What is in store for undisclosed account holders? In 2009, the IRS and U.S. Department of Justice commenced a highly publicized investigation into Swiss bank UBS AG and U.S. account holders who essentially hid their assets from the U.S.Government.
However, the investigation did not conclude with UBS.
To entice taxpayers to come clean and disclose their foreign assets in exchange for lesser penalties, the IRS instituted the Offshore Settlement Initiative Voluntary Disclosure Program (the Initiative).
Although the deadline to participate in the Offshore Settlement Initiative is long gone, it is clear that offshore tax evasion will continue to be a top IRS enforcement priority.
Now, what can U.S. taxpayers with undisclosed offshore accounts who did not make the October 15, 2009 Offshore Settlement Initiative deadline expect coming up?
The IRS FBAR plan will be ramping up their Information Document Requests or IDRs targeting offshore bank accounts.
The FBAR Information Document Request is a proper and structured process for the IRS to request and get information from taxpayers, including information regarding offshore bank accounts.
Beware the FBAR!
Although not as formal as a subpoena, an IDR carries with it consequences for failure to comply and can lead to further inquiry and possible sanction.
The IRS will focus Information Document Requests on U.S. taxpayers with offshore assets and accounts that failed to disclose these interests to the U.S. government on their Form 1040, U.S. Individual Tax Returns, and file a corresponding Form TD F 90-22.1, Foreign Bank Account Reporting FBAR.
If IRS agents discover that a taxpayer has not reported an interest in an offshore account or income accruing on such accounts during the course of an audit, the IRS under the FBAR plan may impose steep penalties including the greater of $100,000 or 50% of the offshore account balance for willful failure to file an FBAR for each account.
Additionally, taxpayers could be subject to criminal prosecution and jail time for FBAR related tax evasion.
The issues surrounding FABR and these IDRs are extremely delicate and should be approached with considerable caution. Taxpayers who have been sent an FBAR Information Document Request by the IRS are best served by getting in touch with a tax attorney who is experienced at resolving disputes with the IRS and FBAR issues quickly.
An attorney can direct the taxpayer how best to answer an FBAR Information Document Request and will be able to talk with his attorney the most appropriate course of action.
Otherwise the Internal Revenue Service under FBAR can seek formidable fines and possible criminal prosecution against those U.S. Taxpayers believed to be hiding assets in undisclosed offshore accounts.
- IRS Offers New Amnesty For Offshore Tax Cheats (blogs.forbes.com)
- IRS’ Latest Offshore Accounts Voluntary Disclosure Program Not Right for Many Taxpayers (blogs.forbes.com)
- Is Moving IRA Accounts Offshore Legal? (brighthub.com)