Form 8938, Statement of Specified Foreign Financial Assets, is a new reporting form. Form 8938…
IRS Collects $10 Billion From Voluntary Disclosures of Foreign Assets
The Internal Revenue Service’s efforts to prod taxpayers to disclose their offshore bank accounts and pay taxes on their holdings have reached the $10 billion mark and prompted over 100,000 taxpayers to come forward, the IRS said last Friday in a public statement.
The latest figures indicate 55,800 taxpayers have entered the IRS’s Offshore Voluntary Disclosure Program to resolve their tax obligations, paying more than $9.9 billion in taxes, interest and penalties since 2009. On top of that, an additional 48,000 taxpayers who have not willfully avoid paying taxes have made use of separate streamlined procedures to correct their previous omissions and meet their federal tax obligations, paying approximately $450 million in taxes, interest and penalties.
The Offshore Voluntary Disclosure Program, or OVDP, allows taxpayers who have undisclosed income from foreign financial accounts and assets the chance to catch up with their tax filings and information reporting obligations. Taxpayers can either voluntarily disclose their foreign financial accounts and assets, or else risk detection by the IRS at a later date, exposing them to more severe penalties and possible criminal prosecution.
“The IRS has passed several major milestones in our offshore efforts, collecting a combined $10 billion with 100,000 taxpayers coming back into compliance,” said IRS Commissioner John Koskinen in a statement. “As we continue to receive more information on foreign accounts, people’s ability to avoid detection becomes harder and harder. The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.”
The IRS has developed a Streamlined Filing Compliance Procedures that is open to taxpayers who have not been willfully avoiding taxes. Taxpayers in the U.S. and in other countries have been making submissions under the streamlined program. The procedures have led to the submission of over 96,000 delinquent and amended income tax returns from 48,000 taxpayers using these procedures. A separate process exists for taxpayers who have paid their income taxes but not filed certain other information returns, such as the Report of Foreign Bank and Financial Accounts, also known as the FBAR.
The IRS recently revised the certification forms used for the streamlined procedures. The most current versions of Forms 14653 and 14654 are available on IRS.gov. In addition, some of the most commonly used phone numbers for the Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures have changed.
The IRS’s series of Offshore Voluntary Disclosure Programs are not the only factor prompting taxpayers to disclose their foreign bank accounts. In 2010, Congress passed the Foreign Account Tax Compliance Act, or FATCA, as part of the HIRE Act. The legislation requires foreign financial institutions to report on the holdings of U.S. customers or else face stiff penalties of up to 30 percent on their income from U.S. sources. To implement the controversial legislation, the Treasury Department signed a series of intergovernmental agreements with the tax authorities in other countries, under most of which the information is first given to the local tax authority, which in turn passes it along to the IRS.
This form of automatic third-party account reporting has now entered its second year and is convincing more taxpayers to voluntarily disclose their holdings before their bank provides it to the tax authorities. More information also continues to come to the IRS as a result of the Justice Department’s Swiss Bank Program, the IRS noted. As part of a series of non-prosecution agreements with banks such as UBS, the participating banks continue to offer information on potential non-compliance by U.S. taxpayers.
As a result of FATCA, our law firm continues to expect aggressive enforcement of US tax laws against noncompliant taxpayers with foreign assets and income. Individuals with possible noncompliance should immediately speak with an experienced competent tax attorney for advice.