The IRS recently published its annual “Dirty Dozen” list of tax scams, with offshore accounts remaining squarely on that list. Over the years, some U.S. individuals and business entities have attempted to avoid U.S. taxes by “hiding income in offshore accounts, brokerages…nominee entities…foreign trusts, employee-leasing schemes, private annuities or insurance plans.” Others may have innocently engaged in such transactions without knowing the legal consequences. While U.S. persons can keep funds in offshore accounts and invest in offshore entities, there are reporting requirements that must be followed, with the income from such accounts and entities being generally subject to tax in the United States.
Over the past few years, the IRS has aggressively enforced compliance with these tax and reporting requirements by establishing agreements with partner jurisdictions, creating automatic third-party account reporting, and promoting an offshore voluntary disclosure program. The IRS has not only pursued taxpayers but bankers and others who helped taxpayers hide assets, conducting audits resulting in payment of millions of dollars and filing criminal charges leading to billions of dollars in criminal fines.
In related news, the IRS recently announced that its offshore voluntary disclosure program will close on September 28, 2018, with the IRS warning that, “[p]otential civil penalties increase substantially if U.S. taxpayers associated with participating banks wait to resolve their tax obligations.”
It’s worth noting that the U.S. international reporting requirements can be somewhat complex and confusing. If you’re a taxpayer or accounting professional who has questions about them, please feel free to give us a call.