What Civil Penalties Might Apply If I don’t Disclose My Foreign Assets And The IRS Examines Me?

FBAR attorney in Chicago Illinois

Failure to file an FBAR (Foreign Bank Account Report) can cost a pretty penny. Even if the IRS unearths unintentional violations, it can still smack you with penalties.

Hire An FBAR Attorney To Help With International Tax Reporting

Under United States tax laws, expats, permanent residents, and citizens associated with overseas financial holdings — whether directly or indirectly — must submit documentation to the IRS if the amount is equal to or over $10,000 at any time during the year.

A person who willfully fails to file an FBAR faces penalties up to $100,000 or 50 percent of the total balance in foreign accounts.

In 2011, the U.S. started imposing penalties on taxpayers for willful nondisclosure of foreign accounts, including bank accounts, mutual funds, brokerage accounts, securities, and other international assets.

Once the IRS notifies a taxpayer of delinquency, he/she has 90 days to pay up. If its not paid within 90 days, an additional $10,000 per month is imposed per item, maxing out at $50,000 per return.

FBAR filings can be complex, especially if a person has varied financial interests. An FBAR attorney can make sure you file timely, accurate tax returns.

What can happen if you don’t use a tax lawyer to sort through complicated matters? To give you an idea, the IRS can smack you with a 20% to 40% fine. In the case of fraud, that percentage can scream up to 75%.

The Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program (OVDP) is an IRS program designed to help taxpayers who owe back taxes on foreign accounts and may be eligible for reduced penalties. OVDP protects participants from criminal liability.

In 2014, authorities modified the OVDP. As a result, taxpayers who submitted OVDP paperwork before 2014 may be able to have their cases reconsidered. For case reviews, taxpayers must request a review in writing.

Taxpayers with undisclosed foreign assets should use the OVDP to avoid substantial penalties or criminal prosecution. Moreover, parties that don’t submit voluntary disclosures are likely to catch an audit.

Tax Evasion and Criminal Charges

In addition to civil penalties, the IRS can bring criminal charges for failing to file tax returns, filing a false tax return, and tax evasion. Taxpayers convicted of criminal charges can face serious consequences.

  • Failing to file an FBAR can result in a 10-year prison term and criminal penalties up to $500,000.
  • Filing a false return can result in a 3-year prison term and a fine up to $250,000.
  • If convicted of tax evasion, a person is subject to a prison term of up to five years and a fine up to $250,000.
  • If convicted of conspiracy to defraud the government, a person is subject to a prison term of up to 10 years and a fine up to $250,000.
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