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Should I Report My Foreign Bank Account Through the Offshore Voluntary Disclosure Program?


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6/13/2014
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Offshore Voluntary Disclosure Program vs. Quiet Disclosure

Have a foreign bank account? 

Did you know failing to disclose this to the IRS and FinCen could land you in prison?

What is your best bet if you have undisclosed foreign bank accounts?

  • “Quiet Disclosure” – You Amend and Disclose what you failed to the first time around.
    • Pros – Less costly.
    • Cons – No guarantee IRS won’t criminally prosecute.  Potentially forfeit 50% of bank balance once (or even annually).
  • “Offshore Voluntary Disclosure Program” – You apply to the OVDP Program and tell the IRS you haven’t filed and agree to a 27.5% penalty for accounts over $75,000 or a 12.5% penalty for smaller accounts.
    • Pros – Gurantee IRS won’t criminally prosecute.
    • Cons – You pay 27.5% of account balances for one (1) year.

 

The More You Know…

Did you know you could be responsible to pay the IRS 50% of the bank account balance in each account or a 10,000 penalty for failing to file?  These penalties can even be imposed annually for each year you failed to file!

Have you included the interest from the account in income on your U.S. tax return?

Did you know you may face understatement of tax penalties for undisclosed interest?  Most commonly these are an additional 20% for negligent non-disclsoure and 25% for delinquent payments.

Have you filed a Foreign Bank Account Reporting (“FBAR”) Form TD F 90-22.1 (now FinCen Form 114)?

Do you know if you need to file Form 8938?

Did you know that the FBAR Form TD F 90-22.1 (now FinCen Form 114) must be filed by June 30th each year?

Did you know negligently failing to do so could cost you $10,000 each time?

Do you know when to Opt Out?

Criminal Penalties

  • Willful Failure to File FBAR – $250,000 or 5 years in prison or both.
    • 31 U.S.C. § 5321(a)(5)(C), 31 U.S.C. § 5322(a), and 31 C.F.R. § 103.59(b) for criminal.
    •  
  • Willful Failure to File FBAR and Other Crimes – $500,000 or 10 years in prison or both.
    • 31 U.S.C. § 5321(a)(5)(C), 31 U.S.C. § 5322(a), and 31 C.F.R. § 103.59(C) for criminal.

 

Civil Penalties

  • $10,000 negligent failure to file penalty - 31 U.S.C. § 5321(a)(5)(B).

 

  • 50% of undisclosed proceeds – can be assessed on an annual basis - 31 U.S.C. § 5321(a)(5)(C).

 

  • Other regular IRS penalties may also be imposed, particularl with regard to understatement of tax on interest payments.


Category: Tax Law


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