Third Parties Reporting Very Likely to Expose Non-Compliant Offshore Account Holders to IRS

By:  Coleman Jackson, Attorney, CPA
November 15, 2016

Third Parties Reporting Very Likely to Expose Non-Compliant Offshore Account Holders to IRS

For approximately two years now, banks and other financial institutions, otherwise known as “Third Parties” located in foreign countries have been reporting account holders’ information, either directly to the Internal Revenue Service or indirectly through local governmental agencies pursuant to U.S. Treasury Department Intergovernmental agreements.  The logical conclusion is that as U.S. persons (U.S. Citizen & Green Card Holder) foreign bank account information is turned over to the U.S. Treasury or IRS, increasingly non-compliant offshore account holders will be fully known to the IRS

This third parties disclosure of offshore account holders to the IRS has increased the number of account holders who are taking advantage of the IRS Offshore Voluntary Disclosure Programs. The IRS Commissioner in recent days stated that,

“The IRS has passed several major milestones in our offshore efforts, collecting a combined $10 billion with 100,000 taxpayers coming back into compliance.  As we receive more information on foreign accounts, people’s ability to avoid detection becomes harder and harder.  The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.”

The word to the wise non-complaint offshore account holder is to act responsibly because if caught, the penalties for non-compliance can be very very stiff… civil penalties and possibly criminal prosecution.  The taxpayer has only two options, and option (a) below is a foolish course of action: 

  1. Do nothing and increasingly expose themselves, their families and businesses to financial ruin and possible jail. This is the big-bird with its head in the sand option; or
  2. Seek acceptance into the appropriate IRS voluntary disclosure program while applicants are still being accepted.

Just think about it with head out of the sand!  The IRS reportedly collected $10 billion from 100,000 taxpayers who voluntarily disclosed their offshore accounts.  That is a lot of money; it would not be shocking if the IRS implement extremely aggressive collection procedures in their attempt to collect even more money from non-compliant offshore account holders exposed in the Third Parties disclosures.  If the IRS has the foreign account holders’ information; it is simply a matter of time and IRS resources and priorities as to how they bring offshore account holders into tax compliance; or pressure-encourage all non-complaint offshore account holders to voluntarily come into compliance with U.S. tax laws, including the Foreign Accounts Tax Compliance Act (FATCA); and the laws governing Foreign Bank and Financial Accounts, otherwise known as the FBAR.  Wise people have wisdom; but, fools act against wisdom.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

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