Nardone Law Group’s experienced tax attorneys, located in Columbus, Ohio, routinely advise taxpayers about U.S. tax reporting obligations regarding foreign financial accounts and the importance of reporting previously undisclosed foreign accounts. The Internal Revenue Service offers various programs that allow taxpayers to disclose offshore accounts and resolve any tax and penalty obligations. The Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Filing Compliance Procedures (SFCP) offer taxpayers who have undisclosed foreign accounts a way to become compliant with the U.S. tax law. In a previous article, “IRS Authorized to Serve ‘John Doe’ Summonses to Target Offshore Accounts in Belize,” we discussed the IRS’ most recent effort to expose taxpayers with undisclosed foreign accounts by issuing “John Doe” summonses to foreign financial institutions to gain information on certain groups of taxpayers. The IRS remains committed to stopping offshore tax evasion and has recently encouraged taxpayers with undisclosed foreign accounts to strongly consider utilizing existing voluntary disclosure programs to come into full compliance. Please see below.
Automatic Third-Party Account Reporting Provides Assistance to Combat Offshore Tax Evasion
On October 16, 2015, the IRS Commissioner, John Koskinen, urged taxpayers with undisclosed foreign accounts to consider available options, such as the voluntary disclosure programs, to come into compliance with the U.S. federal tax laws (IRS News Release). He further stated that the automatic reporting of foreign accounts has given the IRS a stronger hand in fighting tax evasion. Through the implementation of the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements (IGAs) between the U.S. and partner jurisdictions, automatic third-party reporting has made it less likely that offshore accounts will go unnoticed by the IRS. FACTA is an important tool the IRS has utilized in its fight against offshore tax evasion.
Further, the Swiss Bank Program continues to reach non-prosecution agreements with Swiss financial institutions that facilitated past non-compliance work. As part of this program, banks provide information on potential non-compliant U.S. taxpayers. A taxpayer’s potential civil penalties significantly increase if U.S. taxpayers associated with participating banks wait to apply to OVDP. The IRS has indicated that many U.S. taxpayers have made use of the offshore compliance programs, generating over $8 billion from these disclosures.
Success of the Voluntary Disclosure Programs
Both the Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Filing Compliance Procedures (SFCP) enable taxpayers to correct prior omissions and meet their federal tax obligations. The purpose of both programs is to encourage taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS later and face more severe penalties. The OVDP was created in 2009 and was specifically designed for taxpayers with exposure to potential criminal liability and substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. The SFCP, initiated in 2012, was developed to provide relief for taxpayers who certify that their failure to report foreign financial assets and pay due taxes, did not result from willful conduct. The creation of these two programs has enabled the IRS to collect an abundant amount of unpaid tax from previously undisclosed foreign accounts.
Since the creation of the OVDP, there have been 54,000 disclosures. From these disclosures the IRS has collected more than $8 billion. In addition, more than 30,000 taxpayers have used the streamlined procedures to come back into compliance with U.S. tax laws. Further, the IRS has conducted thousands of offshore-related audits, based on the information obtained from investigations and under the terms of settlements with foreign financial institutions. These audits have produced tens of millions of dollars for the IRS. The IRS had also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.
Contact Nardone Law Group
Nardone Law Group represents businesses and individuals with federal and state tax issues, including identifying any reporting and payment obligations related to foreign financial accounts. Through our tax controversy services, we assist taxpayers in utilizing the Offshore Voluntary Disclosure Program or Streamlined Filing Compliance Procedures to come into compliance relating to previously undisclosed foreign accounts. If you have unreported foreign income, or an undisclosed foreign account, asset or entity, you should contact an experienced tax attorney today. Nardone Law Group’s tax lawyers and professionals have vast experience representing clients before the IRS. 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.