What Are Some Of The Potential Criminal Charges If I Don’t Disclose My Assets And The IRS Examines Me?
Criminal charges can be filed against an individual for failing to file a tax return, filing a false tax return, and tax evasion. Failing to disclose assets and pay appropriate taxes can result in steep financial penalties, as well as prison sentences.
Penalties for Non-Disclosure of Assets
According to U.S tax laws, citizens, permanent residents, and certain other individuals with financial interests in foreign accounts including bank accounts, brokerage accounts, securities, mutual funds, and other foreign accounts must report assets for each tax year. If the total value of all financial accounts exceeds $10,000 at any time during the year, financial interests and assets must be reported to the IRS. Such assets are usually reported by filing a FBAR, Report of Foreign Bank and Financial Accounts, to the IRS with annual tax returns. Failure to file a FBAR can result in civil penalties that amount to 50 percent of the total monetary balance in foreign accounts, as well as fines up to $100,000.
In addition to civil penalties for failing to file a FBAR, if the failure to file is intentional, an individual is subject to criminal penalties, as well as civil penalties. Criminal charges also apply for intentionally failing to file a tax return, filing a false tax return, tax evasion, and conspiracy to defraud the government. Any individual that’s convicted of criminal charges for non-disclosure of assets faces serious consequences including:
- Failure to File a FBAR – Fines of up to $500,000 and a prison term up to 10 years
- Filing a False Tax Return – Fines of up to $250,000 and a prison term up to 3 years
- Tax Evasion – Fines of up to $250,000 and a prison term up to 5 years
- Conspiracy to Defraud the Government – Fines of up to $250,000 and a prison term up to 10 years
Reporting financial interests in foreign accounts can be a complex and expensive process, especially if there are multiple accounts. The IRS offers tax assistance to taxpayers who owe penalties on foreign assets through its Offshore Voluntary Disclosure Program (OVDP). The program works with taxpayers to reduce civil penalties and provide protection against criminal charges. Since non-disclosure of assets to the IRS results in very serious consequences, taxpayers with undisclosed foreign accounts and assets are encouraged to use OVDP to become compliant on taxes and avoid substantial civil penalties and/or criminal charges.