It seems that every month we share an article describing the ever-increasing reach of the IRS throughout the world as they attempt to put a stop to any and all taxpayers who would try to avoid paying their fair amount of taxes. This month is no different, as FATCA, the Foreign Account Tax Compliance Act, continues to make its presence felt all over the globe. The IRS will stop at nothing to find and prosecute tax cheats who are attempting to hide money in foreign financial institutes. That includes punishing foreign banks that refuse to cooperate. In fact, the IRS has had so much success that in just the last five to six weeks, at least eleven more banks located in Switzerland have agreed to join the push. And there will be more in the coming weeks and months.
Penalties Going Up As Well
With FATCA in full fledge attack mode the IRS is getting help from the entire world to put an end to overseas tax evasion. Plus, the number of financial institutions is not the only thing that is rising when it comes to foreign bank account compliance. So you better be aware of the consequences that you might face. That’s because the IRS has also updated the list of all foreign banks that will carry a 50 percent penalty instead of a 27.5 percent penalty. That penalty is based on the IRS’s Offshore Voluntary Disclosure Program (OVDP) with the highest account balances. This penalty is part of the OVDP reforms that made it more lenient for non-willful taxpayers and tougher on the willful.
More Banks on the Higher Penalty List
There are now 37 banks listed that carry a 50 percent penalty for those taxpayers that were non-compliant. For banks not on this list the penalty is still 27.5 percent, which is a lot, but it’s much better than being prosecuted and paying even more, including civil penalties. For those that are non-willful the impact is less severe. These taxpayers can use the streamlined program, which is less costly and much easier to manage. For willful noncompliant taxpayers the streamlined program is not an option.
OVDP Is a Good Option
The bottom line when it comes to offshore accounts is that compliance still remains the best alternative. If you haven’t been compliant and you’re ready to come clean, then the Offshore Voluntary Disclosure Program is much better than being prosecuted and facing the full wrath if the IRS. Even though 50 percent might seem like a lot, it is much better than the penalties that come along with willful civil violations. Those penalties can be as much as $100,000, or 50 percent of the balance of the account in question for every violation, whichever is greater. That means the possibility exists that you could be charged with civil penalties that are actually greater than the balance in your foreign account. In that regard, 50 percent doesn’t sound so bad. If you have offshore an account and you’re not sure whether or not you are compliant then you need to speak with GROCO today for help. Click here or call us at 1-877-CPA-2006.