U.S.-connected individuals must tell the IRS about foreign accounts held at offshore banks if they have a total of $10,000 or more across all of their accounts at any point over a one-year period. Taxpayers have to tell the IRS about these accounts by filing an annual Report of Foreign Bank and Financial Account (FBAR). The deadline for filing FBARs was June 30, 2016 this year and forms could be filed electronically.
The FBAR requirement is not a new one, but many taxpayers have just recently learned about it as the IRS has been cracking down on offshore tax evasion. If you were supposed to file FBARs in the past and did not do so, you’re in a difficult position now.
You can continue to not file FBARs, which means you are out of compliance with tax law and are likely to get caught at some point and face substantial fines and even criminal penalties. You could also file the forms, but that could potentially lead to questions about where this account suddenly came from and whether you didn’t follow the rules in the past.
If you file FBARs for the first time and the IRS finds out you didn’t comply with tax rules in prior years, this can have big consequences for you as well. Before you take action, you should talk with a Boston criminal tax lawyer to find out what your best options are for dealing with your difficult tax situation.
Is Quiet Disclosure Right For You?
There has been an ever-increasing number of people filing FBARs for the first time, suddenly alerting the IRS to offshore accounts. There have also been increasing numbers of people amending tax returns to provide details to the IRS about offshore accounts in past years. Filing amended returns and filing an FBAR for the first time when you were supposed to in the past is called a Quiet Disclosure.
The Government Accountability Office (GAO) is urging the IRS to crack down on quiet disclosures. GAO suggests the IRS should look at whether taxpayers are filing FBARs and reporting foreign bank accounts for the first time. If so, the IRS can investigate whether they failed to follow rules in the past and can impose penalties.
If the IRS does this, obviously this is bad news for a taxpayer who may have just discovered he was supposed to file FBARs and who may be simply trying to do the right thing. The penalties for not filing FBARs are draconian, as there are even some situations where taxpayers end up being fined more money than they had in the accounts they were holding offshore. You don’t want to lose a lot of money because you did the right thing and started complying with tax law.
Before you decide quiet disclosure is the right option, and before you file FBARs for the first time, you should talk with a criminal tax lawyer like Kevin Thorn. An attorney can assist you in determining if you are better off participating in an Offshore Voluntary Disclosure program rather than making a quiet disclosure.
For a consultation, contact Kevin E. Thorn, Managing Partner, at email@example.com or (617) 692-2989