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International Tax Evasion – IRS Eases Up on Foreign Bank Accounts Reporting Penalty

The words “international tax evasion foreign bank account reporting” have a fearful tone.  Rightly so, for those that keep hiding but not for those that come forward.  The good news is an easing up on the foreign bank account reporting (FBAR) penalty.

With the help of an international tax accountant, you may owe the IRS less than you think. 

The IRS have a new regulation that limits the penalty to $100,000.  The penalty is still one half of the highest foreign bank account balance but with a maximum of $100,000.

The IRS streamlined initiative is the best method if you can qualify.  To qualify you need to give the IRS some type of proof or explanation that you were not willful.  For example, a non-resident parent has your name on an bank account to transfer the account to you when they pass away.

You will want to discuss this with an attorney  that has been either with the IRS or the Department of Justice.

International tax evasion is different than other crimes. 

It does not mean that you were a mobster.  For example, you opened a foreign account owned by you or a foreign company.  You did not report the income earned on the account.  Another example is you have a foreign business or investment property.  You did not report the income.

For this the IRS has the voluntary disclosure initiative.  Under this program, the IRS does not prosecute international tax evasion.  However, besides paying the income tax for the last six to eight years, the IRS charges a penalty.  The amount of the penalty depends on your assets.  The maximum amount of 27.5% of the highest value of all of your foreign assets.

International Tax Planning with the Voluntary Disclosure Initiative.

The 27.5% penalty can never exceed the penalties that you would pay for the failure to file the FBAR and other international tax returns (such as Form 5471).  

As I stated above a new IRS regulation has a cap on the FBAR penalty of $100,000 per year.  And there are more tax savings that only an international tax accountant can help you with (by the way you need both a criminal attorney and a international tax accountant).

For example, here is just one of the many international tax strategies.  The IRS allows you to dissolve all of your foreign corporation without incurring additional tax.  This saves taxes because eventually you or your heirs will want to take the assets out of the foreign corporation.

Dissolving any corporation (domestic or foreign) is a taxable event except under this the IRS program.

Here is another example.  You own foreign investment funds.  Usually, the income tax on these funds is huge (this law is called “passive foreign investment company” with the nickname of ‘PFIC).  Under this IRS program, you are allowed two special tax laws.  You pick the law that is best for you.

One of these laws taxes the PFIC profit at only 20% without the Obama Care 3.8% excise tax on investment income.

Well, this is enough for this blog.  My firm is an international tax CPA firm.  If you would like us to help you and your attorney, then please contact me, Brian Dooley, CPA, MBT, at [email protected]