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Why you should disclose your offshore assets voluntarily

| Jan 13, 2016 | Uncategorized |

Many people with offshore assets are tempted to not disclose the assets to the IRS for the chance that the IRS will not discover the assets, resulting in tax breaks. However, this is often a mistake as the IRS comes down hard on people who do this and get caught.

In effort to encourage voluntary disclosures, the IRS has increased penalties and often pursues criminal consequences after offshore assets are discovered.

In fact, the civil penalty that applies when offshore assets have not been disclosed and are discovered by the IRS is a whopping 50 percent of your largest account balance for each year that the asset was not reported, for a maximum of eight years. 

On the other hand, the penalty for people who self-disclose offshore assets is 27.5 percent for only the highest balance during the past eight years, rather than every year.

If you come to the conclusion that self-disclosing your offshore assets is the right thing to do, then a tax attorney can help you take advantage of the IRS’s amnesty program. To obtain partial amnesty, the program requires the following general process:

  • Completing the Foreign Bank Account Reporting (FBAR) form.
  • Completing additional forms, including Form 8938.
  • Completing amended tax returns with the inclusion of unreported income from offshore accounts.
  • Submitting all necessary forms required by the IRS.
  • Responding to the IRS’s requests for documentation, information or other inquiries.

Keep in mind that if you are already under investigation by the IRS, then you are not eligible for the partial amnesty program or self reporting. However, you will still need an experienced tax attorney on your side to help you communicate with the IRS and avoid the worst potential consequences.

Keep reading to learn more about self-reporting offshore assets and why it is important to act now instead of later.

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