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Offshore Accounts Archives

Exclusion of certain foreign income from your tax forms

We have often spoken about the difficulties taxpayers face concerning compliance with offshore income reporting requirements. This includes significant enforcement of regulations contained under the Foreign Account Tax Compliance Act (FATCA). The reporting requirements under FATCA are stringent.

Offshore income and IRS disclosure programs

The Internal Revenue Service will likely continue to crackdown on alleged failures to report offshore income and foreign assets. Any taxpayer with over $10,000 invested in foreign bank accounts could be a target for the IRS. Tax penalties for noncompliance are significant. Not only can the IRS take 50 percent of any value of the account, the agency may also assess fines, penalties and possible criminal charges.

Offshore accounts and the use of John Doe summons

A recent federal court decision demonstrates the determination of the IRS in tracking down offshore revenue. The federal court authorized the agency to use a John Doe summons in order to locate information about American citizens holding offshore accounts in Panama. Specifically, the IRS desired to use such a summons to locate accounts linked to debit cards.

Offshore account information and John Doe summonses

The IRS has at its disposal a large number of options for pursing offshore account information. For example, there was a recent federal court action that allowed for the IRS to serve a John Doe summons to access offshore account information tied to debit cards. The IRS uses such a tool to access information that could possibly reveal violations of tax laws.

Deferred compensation plans and offshore accounts

Many U.S. citizens, including Michigan residents, put their offshore savings into deferred compensation plans. Taxpayers may do this in an attempt to defer otherwise taxable income to avoid paying at current tax rates. In fact, many individuals with offshore accounts have been doing this since the 1990s.

Automatic extension for FBAR filings

While the filing deadline for a report of a foreign bank account (FBAR) has traditionally been June 30, the Financial Crimes Enforcement Network (FinCEN) announced an extension of this filing date to Oct. 15. There is no requirement for a specific request for the extension by the taxpayer. Apparently, this extension will also be permanent. The form for filing such reports is a FinCEN 114.

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