Why Should You Report Foreign Accounts in 2021
Why Report Foreign Accounts in 2021
5 Reasons Why You Need to Report Foreign Accounts: When it comes to IRS compliance enforcement priorities, reporting foreign accounts timely and accurately is near the top of the list. Over the past 10-to-15 years, the Internal Revenue Service has significantly increased enforcement of international reporting of foreign bank and financial account forms. Some requirements such as the FBAR (FinCEN Form 114) have been around for over 50 years, while FATCA (Foreign Account Tax Compliance Act and Form 8938) is relatively new. Although there are many reasons why US Persons should consider reporting foreign accounts — here are five important reasons why you should report foreign accounts and get into offshore compliance:
Your Foreign Bank Reports to IRS
More than 110 hundred and 10 foreign countries and over 300,000 Foreign Financial Institutions have agreed to reciprocal reporting with the US government. That means there is a high likelihood that at some point in time, your Foreign Bank or other Financial Institution abroad will report your account and income related information to the US government. If you are out of compliance — this may lead to an audit and subsequent offshore penalties.
FBAR Penalties are Bad
As far as penalties go for noncompliant foreign account reporting, the FBAR penalties are pretty bad. While many Courts have taken the Taxpayers’ side on matters involving non-willful penalties — the Internal Revenue Service and US Government have been very successful with enforcing willful penalties — where penalties are typically 50% of the maximum value of the account.
IRS Wins Often on Reckless Disregard of
One of the most disjointed aspects of the FBAR penalty scheme, is that the US government need not prove that the Taxpayer was willful — or had any intent to avoid reporting their foreign accounts — in order to hold them liable for willful penalties. Rather, all the US government is required to do show that Taxpayer acted with reckless disregard. And, Federal Courts across the nation have affirmed this lower threshold for the US government on the issue of civil willful penalties.
FATCA Fines are Bad Too
FATCA for Taxpayers generally refers to Form 8938, which is used to report Specified Foreign Financial Assets — including items such as Overseas Accounts, Life Insurance Policies, and Foreign Pension Plans. In recent years, the Internal Revenue Service has significantly increased enforcement of the form 8938 penalty (after initially providing leeway during the first five or six years) and penalties can reach upwards of $10,000 per year — plus an additional $50,000 continuing penalty.
Report Foreign Accounts & Regain Your Peace of Mind
Oftentimes, when our International Tax Lawyers are contacted by individuals who are noncompliant with foreign account reporting — the Taxpayers are very scared of the outcome. Unfortunately, this is due to the rampant fear-mongering that tends to take place online — and facilitated through free initial consultations. Some Tax Practitioners want Taxpayers to believe that they are always at risk for criminal and willful penalties — when that is simply not the case. By safely getting into compliance — you can regain your peace of mind.
International Tax Lawyers Represent Clients Worldwide
Our International Tax Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm for assistance.
The post Why Should You Report Foreign Accounts in 2021: IRS Overview appeared first on International Tax Attorney | IRS Offshore Voluntary Disclosure.