United States taxpayers holding financial assets outside of the United States have a financial obligation to report certain foreign assets to the Internal Revenue Service (IRS). Taxpayers who fail to disclose required foreign accounts can face civil and criminal penalties.
The penalties range from up to $10,000 (per violation) for non-willful violations, and up to $100,000 (or 50% of account balance—whichever is greater) for each willful violation—and do note that each year that a taxpayer fails to file constitutes as a separate violation.
There are also criminal penalties involved, which include monetary fines up to $500,000 and up to 10 years of imprisonment. Furthermore, the assessment of a civil penalty does not preclude criminal penalties or prosecution.
The IRS offers several programs for noncompliant taxpayers to disclose their previously undisclosed foreign assets without having to face criminal prosecution.
The Offshore Voluntary Disclosure Program (OVDP) provides an opportunity for U.S. taxpayers who have not previously disclosed foreign assets to disclose these assets to the IRS without having to face criminal prosecution. If a taxpayer qualifies for the program, the taxpayer will be able to rectify noncompliance and will avoid criminal prosecution
While OVDP may provide great relief for those taxpayers with undisclosed foreign assets, the IRS has recently announced that they will be terminating the program on September 28, 2018.
While the current OVDP is ending, there exist other IRS programs that aim to aid taxpayers into compliance. The IRS offers a series of Streamlined Filing Compliance Procedures which are available to taxpayers whose failure to report offshore income and assets is due to reasonable “non-willful” conduct.
At Wood, Buckel & Carmichael, we have experience with helping our clients through the foreign disclosure compliance process and we can review your matter to determine whether participation in OVDP or other IRS compliance programs is appropriate for you.
Based in Naples, our Florida OVDI attorneys serve clients located both locally and across the globe. We welcome you to contact the firm for more information.