It is often said, “only two things are certain in life – death and taxes”, but it turns out that some international taxpayers may at least have a chance at avoiding the taxes part. Several US tax amnesty programs have sprung up in recent years that offer the promise of relief to those caught in the web of ever more vigilant international US tax enforcement. For both individuals and businesses that forget to file tax returns or failed to declare assets.these omissions carry severe penalties. With tax amnesty programs, tax payers in these circumstances are given the opportunity to come forward and pay their taxes with reduced or eliminated penalties.
The IRS Is Cracking Down on Tax Cheats
Acting IRS Commissioner Steven Miller said catching overseas tax dodgers is a top priority of the agency. In a written statement, he said the agency is working to improve the way it identifies people who are still trying get around the agency’s disclosure programs.
The IRS has run four voluntary disclosure programs since 2003. The last three — in 2009, 2011 and 2012 — have yielded almost $5.5 billion in back taxes, penalties and interest. The latest program is still open.
The agency stepped up its efforts in 2009, when Swiss banking giant UBS AG agreed to pay a $780 million fine and turn over details on thousands of accounts suspected of holding undeclared assets from American customers. Recent FATCA legislation now requires foreign banks to comply with US reporting requirements or they themselves risk severe financial disincentives. The noose is closing aroung the necks of foreign tax evaders and the number of those seeking to become compliant has risen significantly in recent years.
How Do US Tax Amnesty Programs Work?
Under normal circumstances, evading tax or overstating one’s expenses and deductions can result in severe penalties. With tax amnesty programs, state governments offer limited time to tax payers to pay back taxes and to file late tax returns. Tax payers are however, also required to file their returns with the IRS. The IRS does not typically reduce penalties or interest, as in the case of state amnesty programs.
Such programs are designed to encourage tax payers to file their tax returns and to pay overdue taxes. What people get in return is reduced penalties as an incentive to come forward and pay taxes – in some instances, the penalties can even be waived off completely. Tax amnesty programs are also designed to enable tax payers who may have overstated their expenses or deductions to amend their tax returns. The purpose of these programs is to collect as much tax revenue as possible within a specified, short period of time. Tax payers are only given a small window of opportunity to come clean and comply with their tax obligations. Benefits of filing under amnesty can also reduce the possibility of other adverse consequences, such as civil or criminal prosecution.
How Do I Become Compliant With The New IRS Foreign Asset Tax Rules?
One of the key issues to overcome in all this is the classification of foreign assets. Whether you have undeclared foreign interest, or have inheritied foreign property, the proper classification of assets can save you 10’s of thousands of dollars in taxes and penalties. The services of a certified public accountant and a tax attorney, with a proven track record in matters of tax compliance, can make filing these returns much more effective and much less painful. You can file late returns, revise filed returns and report additional income with the help of a tax attorney who has a sound knowledge of US tax amnesty programs and their affect on undeclared foreign holdings..
Contact Christopher J. Byrne for a tax lawyer specializing in matters of tax amnesty and International tax compliance.