Earlier this week, the IRS released a statement saying that its voluntary offshore disclosure programs are working. Programs such as the Report of Foreign Bank and Financial Accounts, (often referred to as FBAR) which requires a Form TD F 90-22.1; and the Foreign Account Tax Compliance Act (FATCA) on Form 8938 have helped the IRS recover more than $5 billion in penalties, interest and back taxes in the last couple years.
Since the agency has made the reporting of assets in offshore banks a priority, they say more than 33,000 taxpayers have submitted disclosures. An additional plan goes live in September of this year that will allow Bostonians living abroad and not paying their taxes to make good on their back taxes and obligations as U.S. citizens.
If taxpayers do not submit information regarding their offshore accounts, they can expect a 27.5 percent penalty taken off the top of their highest balance that existed throughout any of the previous eight years. That penalty has steadily increased since 2009 when it was 20 percent and then 25 percent in 2011.
The IRS says its goal to ensure honest taxpayers are not left holding the bill while wealthy American hide their money in offshore accounts to cheat on their taxes.
Another piece of FACTA requires foreign financial institutions to report directly to the IRS certain information about financial accounts held by U.S. taxpayers or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Financial institutions have said that FACTA is a costly burden on their overseas banking and business bottom lines.
Source: thehill.com, “IRS: Offshore programs have raked in more than $5 billion,” Bernie Becker, June 26, 2012