Unreported foreign accounts or income could trigger huge penalties and criminal liability in the U.S. The IRS has fined taxpayers for unreported offshore assets as much as 300% of the accounts the IRS discovered. So, if you’re hiding $1 million in the Cayman Islands, and the IRS catches you, the penalty could be as much as $3 million.
However, there is a sort of amnesty program called the IRS Offshore Voluntary Disclosure Program (OVDP). The OVDP was implemented for taxpayers who have willfully failed to report foreign financial assets and pay all tax due in respect to those assets. The program allows those taxpayers to come forward and avoid the huge penalties and civil liability discussed above, because the OVDP places a cap on the penalties.
Since the initial launch of the OVDP in 2009, the program has seen 56,000 people come forward and pay over 11.1 billion in back taxes, interests, and penalties.
Many taxpayers are not aware of their reporting requirements for offshore assets. The OVDP allows those taxpayers the opportunity to get informed and resolve their non-compliance. Thus, the IRS used this program as a vehicle to increase awareness, and as such, it is only temporary. The IRS has announced that the program will come to an end on September 28, 2018. That means it is not too late. The OVDP will accept disclosures received or postmarked by September 28, 2018.
All disclosures must be full disclosures as well. Meaning that if you report one account, thinking that there is no way the IRS discovers the others, and they do, all of those assets will be subjected to those huge penalties and criminal liabilities discussed above. Further, it is a voluntary program. If you are being audited and then come forward in the program, that is not considered voluntary and you will be subjected to civil penalties, and criminal liability on all assets.
And don’t think the IRS won’t catch you. The Foreign Account Tax Compliance Act (FATCA), passed in 2010, requires foreign financial institutions and certain other non-financial foreign entities to report on the foreign assets held by their U.S. account holders. Since FATCA passed, the IRS’ discovery of unreported offshore assets has climbed dramatically.
If you need to disclose offshore assets, now is the time! Please contact one of our experienced attorneys at EPGD Business Law, located in beautiful Coral Gables. Call us at (786) 837-6787 or email us to schedule a consultation.