The Dreaded IRS Letter 6185: “We received information that you have a foreign account”

Many of our clients have recently received IRS Letter 6185, which begins with “Why we’re writing to you: We received information that you held an interest in one or more foreign financial accounts, foreign entities, or foreign financial assets.”

This letter is an IRS “soft letter” (i.e., a warning letter) to U.S. taxpayers owning foreign accounts. These soft letters indicate the IRS’ renewed focus on taxpayers’ foreign activities. We expect increased audit activity for clients with noncompliant foreign activities.

U.S. persons are subject to tax on worldwide income from all sources including income generated outside of the United States. It is not illegal or improper for U.S. taxpayers to own offshore structures, accounts, or assets. However, taxpayers must comply with income tax and information reporting requirements associated with these foreign activities, otherwise, they are subject to penalties and possible criminal prosecution.

Via FATCA and subpoenaed bank records, the IRS is in possession of records that identify taxpayers with transactions or accounts at offshore private banks. Soft letters are IRS correspondence to targeted taxpayers identifying tax noncompliance and passively seeking compliance.  Failure to respond to such letters may result in audit or penalties and possible criminal prosecution.

However, prior to audit, taxpayers can still become compliant by entering one of the IRS amnesty programs and making payment for applicable taxes, interest, and penalties.

HOW TO RESPOND:

If you received IRS Letter 6185, take it very seriously. Do not ignore the letter. If you have foreign accounts that were not compliant, it is strongly recommended that you seek experienced legal counsel to resolve your situation.

Our office has consulted with hundreds of clients regarding their offshore asset and income compliance issues. Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign assets.

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