If you have an interest in or authority over a foreign bank account, trust, mutual fund or brokerage account that has more than $10,000 in it, you are required to file a Report of Foreign Bank and Financial Accounts (FBAR) with the Internal Revenue Service.If you have in the past failed to file an FBAR, there are several ways you can come into compliance with foreign asset disclosure requirements.
The IRS offers non-compliant taxpayers several options, including the Offshore Voluntary Disclosure Program (OVDP). You can also make use of the Streamlined Filing Compliance Procedures or SFCP. The SFCP is split in two: one for U.S. residents and the other for non-US residents.
The National Law Review notes that there are several main differences between the OVDP and the SFCP. The first is that the OVDP does not require the taxpayer to certify that their failure to report foreign assets was non-willful, whereas the SFCP does require it (along with an explanation).
The second difference is significant as well: the difference in penalties between OVDP and SFCP. Generally, taxpayers can expect to pay a 27.5 percent penalty of the highest aggregate value of the undisclosed funds over an 8-year period.
Compare that figure to what US residents in the SFCP can expect to pay (5 percent over a 3-year disclosure period) and the even lower penalty for non-US residents (no penalty at all).
You probably noticed the third main difference between OVDP and SFCP is the longer disclosure period for OVDP.
Taxpayers who wish to get into compliance with offshore accounts and foreign asset disclosure requirements can speak with a tax attorney experienced in protecting clients' rights and interests.
