Who took advantage of the offshore account “safe harbor” program?admin
A report by the Government Accounting Office details who took part in the first voluntary disclosure program for offshore accounts. If you made an honest mistake and failed to keep up on international account reporting requirements, it is important to speak with an international tax attorney.
March 25, 2014 /24-7PressRelease/ — Congress has been on the hunt for undisclosed offshore accounts for several years now. The latest news comes in a report from the U.S. Government Accountability Office titled “IRS’s Offshore Voluntary Disclosure Program: 2009 Participation by State and Location of Foreign Bank Accounts.”
While it is not against the law to hold a foreign bank account, the account must be disclosed. Any profits are subject to U.S. taxes. Depending on several factors one or two forms may need to be filed.
U.S. persons – U.S. citizens, U.S. residents and entities, such as corporations or LLCs, and trusts or estates formed under U.S. law – with foreign assets of $10,000 or more in a given year must file the Foreign Banks and Financial Accounts (FBAR or FinCEN Form 114) with the Financial Crimes Enforcement Network. A U.S. taxpayer with a foreign account that exceeded $50,000 would also need to file Form 8938 with the Internal Revenue Service.
There have been several “safe harbor” programs for those who did not keep up with these filing requirements. The IRS held the first and second voluntary disclosure program in 2009 and 2011. A third ongoing streamlined round of the Offshore Voluntary Disclosure Program opened in 2012. These programs allow taxpayers to disclose accounts, pay taxes owed along with penalties and interest, but avoid criminal penalties.
GAO findings from disclosures
In its report, the GAO looked at approximately 10,000 tax returns and accompanying FBAR forms filed by disclosure participants in 2009. Some of the disclosures included multiple offshore accounts in multiple countries. Others only had one bank account in a foreign country.
The states with the greatest participation were California, New York, Florida, New Jersey and Texas. For example, Texas had 512 filings that equated to about 5% of the total. It is not surprising that these are some of the largest states.
The most frequently cited countries where foreign bank accounts were held included Switzerland, the U.K., Canada, France and Israel.
Congress has investigated several of the largest Swiss banks. UBS, Switzerland’s largest bank, admitted guilt and agreed to pay $780 million in fines, penalties, interest and restitution in 2008. Last year, a settlement was reached with Wegelin, the oldest Swiss bank. Now Credit Suisse is in the hot seat. Its CEO recently testified in front of a Senate subcommittee and another settlement is expected. Banks in Israel and India may be the next to come under scrutiny.
Taxpayers who have made honest mistakes
Nina Olson, the National Taxpayer Advocate worries that the stiff penalties faced by taxpayers who disclose accounts may deter others from coming forward. For example, the median penalty applied to those with the smallest accounts was almost six times the unpaid tax.
If you have not kept up with the foreign account reporting requirements, contact an international tax attorney to discuss your situation. You will need to proceed carefully to minimize penalties.
Article provided by Brown, PC
Visit us at www.browntax.com
Posted: March 25th, 2014 under 24/7 PRESS RELEASE.