In the 21st century, businesses and investments are increasingly becoming global enterprises. While multinationalism can help foster business success and protect individual assets from market dangers, it also presents tax complications that draw a keen interest from the IRS.
A new tax enforcement structure targeting offshore tax evaders is currently in the early stages of implementation. But, tax reporting requirements can be complex when it comes to foreign assets, and even seemingly innocent mistakes can draw heavy penalties from the IRS. Any U.S. citizen with assets overseas can benefit from the services of a Boston tax attorney and a basic understanding of the new compliance framework for foreign asset holders.
FACTA Reporting By Foreign Financial Institutions Increases Risk of Getting Caught
The Foreign Accounts Tax Compliance Act, or FATCA, means big changes for almost every citizen and business with foreign accounts. Enacted in 2010, FATCA forces foreign financial institutions to disclose the names of American account holders to the IRS or face a 30 percent withholding tax on payments originating from U.S. sources.
Technically, the reporting requirement of FACTA does not go into effect until Jan. 1, 2014. However, many institutions are making preparations for the deadline, and some are already beginning to make disclosures to the IRS.
FACTA means that the IRS will soon have unfettered access to information that was formerly far beyond its reach. Bolstered by an influx of financial disclosures, the IRS has already launched a crackdown on international tax evasion, and efforts should be expected to draw more people into the tax enforcement web as FACTA reports increasingly flow into the hands of watchful IRS agents.
Failure to File FBAR Form Can Result In $100,000 Fine
FACTA can land taxpayers in hot water in a number of ways. One of the most obvious is by alerting the IRS when taxpayers run afoul of Foreign Bank and Financial Accounts ("FBAR") reporting requirements.
An FBAR form must be filed yearly on or before June 30 by individuals or entities with a financial interest, or even signature authority, in foreign financial accounts whose total value exceeds $10,000 at any time during the calendar year to be reported. Even when the back tax and interest on unreported income from offshore accounts is miniscule, fines for failing to disclose can be up to the greater of $100,000 or 50 percent of the total balance of the foreign account per violation.
Get Help With Your Tax Issues From a Massachusetts Attorney
FACTA empowers the IRS to detect FBAR and other technical tax violations in ways that were previously not possible. If you are a foreign asset holder and are concerned about your potential liability under the IRS penalty scheme, contact an experienced tax attorney today.