Foreign Bank Accounts -Are They Really Such A Good Idea?

Foreign Bank Accounts – Are They Really Such A Good Idea?

Reporting Foreign Bank Accounts and US citizens living overseas who are required to file US Tax Returns, are both very technical and complex for most tax attorneys and CPA´s. Sometimes you need a tax professional to help understand what they say and how it applies to your IRS situation.

Call Richard Schickel at 520-448-3531 and lets talk.

If you have ever had more than $10,000 total at any one time in one or more foreign banks or financial institutions and you are a US citizen (or US person), you have a requirement to report it to the Financial Crimes Enforcement Network (FINCEN). Failure to timely file the report and report the income from foreign accounts on your US tax return can result in severe penalties and or criminal prosecution. If you had a requirement to file and didn´t, you could have tremendous exposure. Fortunately, the IRS created an amnesty program for voluntary compliance called the Offshore Voluntary Disclosure Program (OVDP). The OVDP allows taxpayers to voluntarily file past due FBARS and file or amend their tax returns to report the income from these accounts subject to reduced penalties and avoidance of criminal prosecution. They have modified the program and extended the deadline dates several times.

Currently, a date has not been set to end the OVDP program, but the IRS has advised that they can end the program any time. If you have or had a duty to report you need to step forward and do it now. The reason is that in 2010 Congress passed the Foreign Account Tax Compliance Act (as part of the HIRE Act of 2010). It requires foreign financial institutions to reveal the assets of U.S. taxpayers to the IRS or else face stiff penalties. As a result of FATCA, banks worldwide are now cooperating and going through their accounts to see if depositors have U.S. connections. Should the IRS discover that you have or had foreign financial accounts subject to the reporting requirements and decide to audit you it is too late to find cover under the voluntary program. You will be subject to maximum penalties and the possibility of criminal prosecution.

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