IRS giving tax payers a break on offshore account oopsies.
The IRS is giving US taxpayers a break if they're found to be flouting rules governing offshore accounts.
Revisions to its voluntary offshore compliance program provide individuals with U.S. taxpayer obligations, who have not been willfully negligent of the current rules, another opportunity to come into compliance with U.S. tax laws and regulations.
All U.S. citizens, resident aliens and in some cases even non-resident aliens are required to file tax returns with the IRS. This includes reporting worldwide income from all sources, including foreign accounts.
Failure to report offshore accounts and pay taxes on their interest can yield stiff penalties and possible criminal prosecution.
But what if you had not complied with this rule, because you simply didn't know about it and/or you were not able to take advantage of previous voluntary offshore tax compliance programs because you were residing in the U.S. and not abroad?
According to Anil Melwani, CPA, managing partner at 212 Tax & Accounting Services, "Up until recently, there were few options for taxpayers who had unwillingly violated the law. None of them was very appealing."
Realizing its previous Offshore Voluntary Disclosure Program with its 27.5 percent penalty may have been too harsh for some taxpayers who had unwillingly violated the requirements, as of July 1, 2014, an expansion to the streamlined filing compliance procedures announced in 2012 are easing the burden for U.S. taxpayers whose failure to disclose their offshore assets was non-willful.
"Starting on 2010 tax returns, the IRS started asking: Do you have foreign bank accounts? Yes or no? Even if you have one penny on a foreign bank account, the obvious answer is yes," said Melwani.
"However, you only have to report details if you have $ 10,000 or more in foreign accounts.
"If you don't disclose it on your tax returns, you are not in compliance with U.S. tax laws and face criminal prosecution.
"Unfortunately, many people who have a foreign bank account, perhaps because they used to work abroad or still have family assets in their country of origin, do not know about this rule."
Melwani said the expansion of the Offshore Voluntary Compliance Program is particularly timely as the withholding and account due diligence requirements of the Foreign Account Tax Compliance Act (FATCA) went into effect July 1,2014.
Under FATCA, foreign financial institutions are required to report on accounts held by U.S. taxpayers.
Therefore, it is important to come into compliance now, said Melwani.
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|Comment:||IRS giving tax payers a break on offshore account oopsies.|
|Publication:||Real Estate Weekly|
|Date:||Oct 8, 2014|
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