The tax attorneys at Nardone Law Group continue to monitor the latest developments in the Foreign Account Tax Compliance Act (“FATCA”) and the IRS’ continued efforts to combat tax evasion through use of foreign accounts. FATCA requires foreign financial institutions in participating foreign countries to report information to the IRS about financial accounts held by United States taxpayers. Under FATCA, individuals with offshore accounts or interests in foreign entities worth more than $50,000 must file Form TD F 90-22-1 (FBAR) and/or Form 8938 Statement of Specified Foreign Financial Assets. For a summary of FATCA reporting requirements for U.S. taxpayers, please see the IRS’s website here.
The most recent FATCA update came on November 29, 2013, when the United States Treasury Department announced that the governments for the Cayman Islands and Costa Rica have signed intergovernmental agreements with the U.S. Under these intergovernmental agreements, financial institutions in the Cayman Islands and in Costa Rica are now required to report tax information about their U.S. account holders directly to their countries’ respective taxing authorities. The respective taxing authorities of the Cayman Islands and Costa Rica will then share information regarding U.S. persons holding bank accounts in those counties with the IRS. These new intergovernmental agreements with the Cayman Islands and Costa Rican governments demonstrate that the IRS is increasing enforcement of foreign account reporting and tax payment requirements in the United States. Accordingly, taxpayers with offshore accounts or assets who have not disclosed those foreign accounts or assets to the IRS should consider the IRS’ Offshore Voluntary Disclosure Program.
Many taxpayers forego entering the IRS’ formal Offshore Voluntary Disclosure Program based on the belief that, because their foreign accounts or assets are located in a foreign country that does not share information with the IRS, they can simply make a “quiet disclosure” of their foreign accounts or assets to the IRS by filing amended tax returns to include all previously undisclosed foreign income. But, FACTA requires a U.S. taxpayer to report a qualifying foreign account to the IRS regardless of whether or not that foreign account is located in a country that has entered an intergovernmental agreement with the U.S. Thus, taxpayers must beware of the temptation to file a quiet disclosure, as the IRS has increased its efforts and ability to expose those taxpayers. Please see our prior article regarding the IRS Chasing Down Quiet Disclosures Intended to Avoid the Offshore Voluntary Disclosure Program. Accordingly, taxpayers with foreign accounts or assets that must be disclosed pursuant to FATCA should seriously consider the Offshore Voluntary Disclosure Program, as it provides the best means for taxpayers to become compliant with foreign account reporting and tax payment obligations, and to forgo the risk of criminal prosecution for past noncompliance.
Contact Nardone Law Group
The tax attorneys at Nardone Law Group routinely advise clients in Columbus, Ohio and throughout the country about their federal tax reporting and payment obligations and ways to comply with federal tax law, including compliance with laws governing foreign accounts. If you have questions about your federal tax obligations, foreign accounts, or FATCA filing requirements, you should contact an experienced tax attorney. Our experienced tax lawyers will thoroughly review your case to determine what options and alternatives are available. Contact us today for a consultation to discuss your case.