The Internal Revenue Service (the “IRS”) recently announced increasing participation in Offshore Compliance Programs and urged the U.S. taxpayers with undisclosed offshore accounts to strongly consider existing avenues established to come into full compliance with the federal tax law.
The Department of Justice and the IRS designed Offshore Compliance Programs to combat offshore tax evasion. Because circumstances of taxpayers vary widely, the IRS offers several programs for addressing previous failures to comply with the U.S. tax laws:
The Offshore Voluntary Disclosure Program and the Streamlined Procedures enable taxpayers to correct prior omissions and meet their federal tax obligations while mitigating the potential penalties of continued noncompliance. Additionally, Delinquent FBAR Submission Procedures and Delinquent International Information Return are programs for those who have paid their income taxes but omitted certain other information returns.
Affected taxpayers that have undisclosed foreign accounts and assets can come forward and make voluntary disclosure in order to become compliant with their tax filing requirements. Otherwise, harsh penalties, and in some cases criminal prosecution, may be a risk.
The recent spike in the taxpayers’ participation could be the result of the key modifications to offshore disclosure programs that were made in 2014. In June 2014, the IRS announced the expansion of the offshore account compliance programs. The expanded streamlined procedures became available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. For further information on 2014 modifications, please see our article published in July 2014.
The IRS encourages taxpayers to voluntarily disclose foreign accounts and to get current with their income tax returns and information reporting obligations.