American expatriates all over the world are being offered another chance to come clean with the IRS after the U.S. government announced that this year they will be yet again offering reduced penalties for expatriates who failed to file their foreign bank account report (FBAR).
Following the success of last year’s FBAR amnesty, which has generated $1 Billion in pre-payments from taxpayers who chose to come forward with their delinquent FBAR reports during the year, the U.S. government have begin a new program for 2012 that they hope will encourage delinquent tax payers to disclose their accounts and settle their tax bills.
The program is aimed at helping the many American expatriates throughout the world who have found themselves behind on their FBAR reports and are apprehensive about the consequences of their failure to file such reports to the U.S. government.
Understanding FBAR requirements
The FBAR is a mandatory report that must be submitted to the U.S. Department of the Treasury by all individuals who have the equivalent of $10,000 or more in any overseas bank or financial account. Individuals who fail to submit this report in accordance with the annual deadline are usually subject to financial penalties and could face criminal prosecution. However, the 2012 Voluntary Disclosure Program offers individuals who have missed the deadline, for one reason or another, the opportunity to come clean about their overseas accounts without fear of persecution.
Discussing this year’s announcement, David McKeegan, President of tax service firm Green Greenback Expat Tax Services commented: “U.S. expats are not the primary target of the IRS’s Offshore Voluntary Disclosure Program and thankfully the IRS is starting to let them know this.
We have helped hundreds of U.S. expats come forward and voluntarily get caught up on their U.S. taxes and FBAR filings and these individuals have not been penalized.
If you owe money on your taxes, you will likely need to pay the failure to file and failure to pay penalties, but between the Foreign Tax Credit and the Foreign Earned Income Exclusion, individuals need to be making a significant income before this becomes a risk.
For most U.S. expats who are behind on their taxes it is as simple as filing your U.S. expat taxes, your FBAR forms and writing a letter explaining why you have fallen behind. You just need to make sure your taxes are prepared correctly.”
Last year’s Offshore Voluntary Disclosure Initiative saw thousands of U.S. expatriates file their FBAR reports outside of the usual deadline with no criminal prosecution. While such individuals often did face penalties, the fines administered were much more lenient and represented a reduction on those that were levied in previous years.
The 2012 Voluntary Disclosure Program is now in force but an end date has yet to be announced. This means that there is no certainty as to whether the amnesty will run throughout the year and, as such, expatriates who have failed to meet FBAR requirements in the past are being encouraged to take advantage of the program as soon as possible: “This is great news for U.S. expats who are behind on their taxes and or FBAR filings. And it really should motivate any late filers to come forward and get caught up before things change. This is an opportunity not to be missed by any U.S. expat who is behind on his/her taxes,” McKeegan said in a press release.