FBAR Filing: Voluntary Disclosure Information FBAR Filing On Your Overseas Accounts| Gordon Law LTD call at (847) 580-1279 The IRS has set up a voluntary disclosure practice to help those with a foreign account come into the compliance that the IRS requires in the United States. Many of the people who join this program do so after having a foreign account that the IRS did not know about. While the IRS will assess some penalties and fees on the accounts, they are much lower than what the IRS will assess if you keep the account a secret for longer. This fact makes the voluntary disclosure process ideal for a lot of people will foreign bank accounts. This article will look at some of the facts with the voluntary disclosure.
What is the point of voluntary disclosure? The IRS started this process in the hopes of allowing those with foreign accounts that had not been disclosed to become compliant with the tax laws of the United States. Also, the IRS will be able to use the information they gather during the process to understand how foreign countries promote these accounts to taxpayers in the United States. In some cases, these foreign accounts were promoted as a method of evading taxes to the taxpayer. Why should I consider doing voluntary disclosure? When you make a voluntary disclosure, you are becoming compliant with the tax laws in the U.S. This can help you to avoid big civil penalties and can take away the risk of being criminally prosecuted. If you choose to not go through the voluntary disclosure, you are eventually caught by the IRS, and large fees are imposed as well as having to face jail time for evading taxes. You will still owe fees on the overseas money, but it is a much better option compared to letting the IRS find you. You need to go through this practice promptly and complete all of the provisions truthfully. If the taxpayer follows these steps, the IRS usually does not recommend any prosecution Is it possible to use voluntary disclosure if I am already being examined? No. To use voluntary disclosure, you must be in the process before the IRS finds out about your foreign accounts. Once the IRS finds out about your foreign accounts, you forfeit the right to using this process. The IRS will charge substantial fees and depending on the length of deception and other factors, will criminally prosecute you. I have reported all of my income properly over the years, but just found out that I needed to file FBARs for other years and failed to do so. Do I need to use the voluntary disclosure practice to do this?
If you have been filing your taxes properly and reporting all of the taxable income, you do not need to file the voluntary disclosure. The IRS has already taxed you on the money you are earning and will not need to tax you on the same money again. You will need to go through and file a delinquent FBAR report. Attach with this report the reason you filed them late and sent in with the tax returns for the years you missed. Since you paid the taxes correctly, the IRS will not assess a penalty because you did not file your FBAR. What are some of the charges I will face if I do not use voluntary disclosure? The first charges is a higher penalty. The IRS will go back and charge you based on the past six years of the account. On an account that has $1,000,000 in it and just earns interest of $50,000 a year, the taxpayer would only owe a little over $386,000 in fees if they use the voluntary disclosure. If the IRS finds out about the account and voluntary disclosure was not used, the taxpayer will pay over $2,306,000 in taxes. In some cases, the IRS will charge you with criminal charges because you evaded taxes with a false tax return. The criminal charges can include giving years in prison and another $250,000 in fees. Failing to file the FBAR means ten years in prison and $500,000 in fees. It is best to file the FBAR forms as soon as possible to avoid these issues.
Reference: https://www.gordonlawltd.com/tax-law/fbar-filings/