Foreign Bank Accounts
International tax attorneys based in Baltimore, serving those with offshore bank accounts, foreign income, assets abroad.
It is vital for U.S. taxpayers to understand their obligations when it comes to disclosing interests in foreign bank accounts or other assets located abroad when filing their income tax returns. A recent uptick in enforcement of the substantial civil and criminal penalties that apply when individuals fail to comply has created a need for heightened awareness.
Fortunately, anyone with foreign bank accounts or other financial interests abroad can rest assured that the Baltimore tax attorneys of Rosenberg Martin & Greenberg stand prepared to assist with this critical disclosure and documentation process, and take the guesswork out of tax time.
Common Tax Issues Facing Foreign Account Holders
Rosenberg Martin Greenberg regularly assists clients with a wide array of international tax controversies, including:
- Offshore bank accounts
- Foreign-derived income
- Foreign-based assets
Given the fact that U.S. taxpayers are legally required to disclose all interests in assets and bank accounts abroad and to report all foreign income on their U.S. tax returns, it pays to become familiar with the rules and regulations that govern the process.
For example, individual taxpayers with foreign accounts must use Schedule B of Form 1040 to make a proper disclosure. Taxpayers with signatory authority or other interests in offshore accounts must file Form TDF 90-22, also known as a Report of Foreign Bank and Financial Accounts (FBAR). Deadlines and account total minimums also apply.
Because significant criminal as well as civil penalties can attach those who fail to comply with these requirements, it is essential for taxpayers to remain vigilant when it comes to fulfilling their responsibilities.
Civil penalties for willful failure to file a required FBAR can reach the greater amount of $100,000 or half of the total balance of the relevant foreign account, per instance of violation. A non-willful violation deemed by the IRS to be unreasonable can also incur penalties upwards of $10,000 per violation. Fraud and inaccuracy penalties may also be assessed.
While it is certainly true that the IRS is unable to criminally prosecute every failure to file a required FBAR, those who do not meet disclosure obligations still run the risk of very serious sanctions. Failure to file an FBAR can lead to a 10-year prison term and penalties in excess of $500,000. Tax evasion and filing a false tax return are also among the potential charges that individuals may face if their noncompliance is discovered. A criminal tax lawyer is critical when these types of charges are on the line.
Offshore Voluntary Disclosure Opportunities
The severity of the potential penalties for failing to properly report offshore bank accounts and perform accurate foreign income reporting, has led many taxpayers to explore Offshore Voluntary Disclosure Program (OVDP) as a means of becoming compliant. The IRS created the program to assist taxpayers in making disclosures and to offer reductions in penalties as an incentive. Once the agency grants preliminary acceptance into the program, taxpayers have the ability to file amended returns for the preceding 8 years. This provides tardy taxpayers the ability to come clean about unreported income and interests and pay a 50% flat penalty for the year registering the highest balance in all foreign accounts held.
While this program can prove extremely valuable for taxpayers who were unaware of their obligations or simply fell behind in their financial disclosures, it is important for them to enlist the aid of an experienced, knowledgeable international tax lawyer who can examine the facts of the situation and provide the guidance necessary to ensure full compliance.
FATCA and its investigative reach
If the prospective fines and penalties discussed above do not provide sufficient motivation to achieve full compliance with foreign financial account disclosure and income reporting requirements, the implications of the Foreign Account Tax Compliance Act (FATCA) may prove to be the tipping point. Enacted in 2010, but only recently reaching full implementation, the law aims to bolster the government's ability to root out taxpayers who have not fulfilled their obligations and bring them to justice. The statute requires foreign financial institutions to disclose any American citizen with an account or interest exceeding $50,000. Entities refusing to do so are in danger of being shut out of the U.S. market entirely, making their cooperation virtually guaranteed.
The time available for taxpayers to make voluntary disclosures, thereby reducing their exposure to potentially costly penalties, is not unlimited. Once the IRS secures evidence of noncompliance on the part of a specific taxpayer, their ability to participate in the OVDP disappears. For that reason, if you know that a foreign financial institution with which you have an account has received a broad, so-called "John Doe" summons seeking identifying information on any and all noncompliant parties, quick action is necessary in order to mitigate the potential risk.
International Tax Attorneys in Baltimore Who Are Ready to Help
At Rosenberg Martin Greenberg, our tax controversy practice is centered around helping clients understand their reporting obligations and navigate the sometimes perplexing compliance landscape. We can help you file amended returns, secure acceptance into the Offshore Voluntary Disclosure Program, perform complex tax calculations, and counsel those in need of criminal tax defense as a result of their failure to file FBAR and related charges.
We pride ourselves in providing personalized service and a customized approach to solving issues related to undisclosed foreign bank accounts, assets and income. To explore your options, reduce possible penalties and gain priceless peace of mind, contact Brian Crepeau at firstname.lastname@example.org.
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