Foreign Bank Account Holders Face Potential Penalties from the IRS
According to Attorney Michael K. Miller, offshore financial institutions may be making plans to close foreign bank accounts that belong to U.S.-based customers. The IRS is cracking down on these account holders, especially in regards to improperly filed IRS tax forms. As the U.S. confers with numerous countries to implement the Foreign Account Tax Compliance Act of 2010, many are choosing to comply.
Some foreign bank account holders have neglected to report income from their accounts on their IRS tax forms. Unfortunately, this may come back to bite them in the near future. One woman is facing penalties for filing false tax returns from a Swiss bank account she inherited from her husband.
What is the Foreign Account Tax Compliance Act?
This piece of legislature requires all offshore financial institutions to disclose U.S. account holder information with the United States each year. If they don't, the institutions will be hit with a 30 percent withholding tax on some U.S. transactions.
Many countries, including France, Switzerland, and Denmark, are already in bilateral international tax compliance cooperation agreements with the U.S. Some of the banks in these countries are choosing to close the accounts of their U.S. customers rather than submitting necessary disclosures.
If you get a notice from your financial institution to transfer your money, there are several different ways to go about it. Attorney Miller pointed out four:
- Don't do anything so it all just goes away
- Amend your past tax returns and hope it is enough for the IRS
- Choose to report your foreign accounts from now on
- Join the current IRS voluntary offshore disclose program
Attorney Miller said that many people are opting to pursue the last route. Through the voluntary offshore disclosure program, customers can apply for lowered civil penalties and potential protection from prosecution. This program could end soon and the information of some applicants may already be with the IRS, though Attorney Miller said this risk is marginal.
If you have a foreign bank account and are concerned that you may be faced with a difficult decision, don't hesitate to contact Palm Beach tax lawyer Michael K. Miller for a free consultation!