Earlier this year, a set of documents known as the “Panama Papers” was released by an anonymous individual. These documents resulted in the financial exposure of thousands of individuals holding offshore accounts (with records dating back to the 1970s). The Panama Papers have since been used to reveal corruption scandals across the globe and have also illuminated the use of such accounts toward illegal means (including tax evasion).
But that’s not all the Panama Papers have done.
In a much larger context, these documents have revealed the ease at which offshore account holders can be exposed. Even those considered innocent of any crimes were outed (think people like Emma Watson).
So what does this mean for taxpayers?
For one, it means that offshore accounts aren’t as secure as previously believed. Second, it’s brought further attention to these types of accounts, and that means more IRS scrutiny of Foreign Bank Accounts. Third, it’s sparked renewed interest in the Offshore Voluntary Disclosure Program (OVDP).
What are the risks with offshore accounts?
Taxpayers looking to skirt IRS payments through foreign bank accounts open themselves up to “willful liability” and risk heavy penalties. In fact, tax evasion via foreign bank accounts is considered by professionals to be the tax crime with the stiffest punishments. Outed individuals may face fines that often exceed their original bank account balance and, of course, criminal prosecution with a risk of jail time. And let’s not forget, this isn’t a crime the IRS is letting upon (and with the proposed addition of 700 new recruits, the manpower will be available).
Even for those not looking to willfully deceive the federal government, the IRS’ current practice is to seek the maximum penalty regardless of the intent behind mistakes. And now that the IRS requires tax preparers (and tax software) to directly inquire about the existence of offshore accounts, claiming ignorance has become much more difficult.
And what is the OVDP?
If you’ve got an unreported foreign bank account and the thought of over-the-top penalties or possible jail time keeps you up at night, there is hope. The IRS offers the Offshore Voluntary Disclosure Program (or OVDP) for this reason.
This program allows you to report formerly unreported income without facing the possibility of prosecution. While there will be fines associated with this (and most of it is the need to pay back taxes on these foreign accounts), filers no longer have to live in fear of discovery.
Interested in IRS Tax Relief?
Do you have an offshore or a foreign bank account and owe back taxes? You have options. Contact Direct Tax Relief and inquire about the IRS Tax Relief via Streamline Filing Compliance Procedure that might be the best approach for your tax situation.
UPDATE FOR HISTORICAL PURPOSES:
The IRS closed the Offshore Voluntary Disclosure Program in early 2018. Since the program started over 56,000 taxpayers utilized the program to voluntarily comply and pay over $11 billion back taxes, interest, and penalties.