Helping You Bring Your Taxes Into Compliance
I have found that there are two types of scenarios for those with offshore accounts that have not been reported to the IRS. A few people intentionally put assets into overseas accounts to avoid income taxes in the U.S. Many other people have assets in offshore accounts due to other innocent reasons. Perhaps they lived in a foreign country and moved to the U.S., having forgotten about an account. Maybe they inherited some money in an offshore account and are not aware of reporting requirement. Or they could have purchased rental property in another country, with the rental income accumulating in an offshore account for convenience.
No matter the circumstances, the IRS requires that you report assets that are in offshore accounts. My name is Connie Yi, and I am a San Francisco foreign account tax compliance attorney and licensed CPA. I can make sure your foreign accounts are brought into IRS compliance through an offshore asset voluntary disclosure and thereby minimize your exposure to serious criminal and IRS consequences.
If you are under IRS investigation, you are no longer eligible for voluntary disclosure. It is important that you disclose before the IRS discovers.
Who Must Disclose and Why Does it Matter?
If you had more than $10,000 in assets in any calendar year, you are required to file a report (Form TD F 90.22-1) of Foreign Bank and Financial Accounts (FBAR). It must be filed by June 30th of the following year and it applies to offshore:
- Bank accounts
- Hedge funds
- Mutual funds
- Universal life insurance policies
- Variable annuities (Swiss Annuities)
It also applies to debit card or prepaid credit card offshore accounts. There are tax consequences, even if you accept the terms of the latest offshore asset voluntary disclosure initiative. However, failure to disclose carries serious consequences which are increasingly being prosecuted and applied. The penalties for failure to disclose offshore accounts are severe, and the penalties are increasing each year for those who delay in participating in the voluntarily disclosure program. Even those whose assets are small, are at risk. The IRS is looking at everyone — not just the holders of large amounts of assets.
With voluntary disclosure, the IRS agrees not to pursue the following:
- Criminal charges of tax evasion (potential for jail time and a felony conviction)
- Fraud penalties (75% of the unpaid tax)
- Filing penalties for failing to file the FBAR ($100,000 or 50% of the account balance — whichever is greater)
Enforcement via the Foreign Accounts Tax Compliance Act
If you choose not to voluntarily report your foreign accounts, and the IRS comes to you first with an audit or a letter, you will face the severe penalties mentioned above.
It has been my experience that the IRS will discover those assets eventually. As your lawyer I would most likely advise you to voluntarily disclose before the IRS discovers your assets on their own. The IRS signed the Foreign Accounts Tax Compliance Act with banks in other countries which requires any foreign bank that does business in the U.S. to identify any U.S. accounts at their bank.
You may receive a letter from your foreign bank or asset holder during 2012 which will give you the option to pull your assets or the bank will report your assets to the IRS.
As a California tax attorney and licensed CPA, I can get you back into offshore tax compliance via an offshore asset voluntary disclosure.