IRS – Amnesty Ending for Offshore Money
- September 12, 2018
- 2 min read
- 233 reads
On September 28, 2018, the Internal Revenue Service, or IRS, will close down its Offshore Voluntary Disclosure Program or OVDP.
OVDP Overview and History
As many Americans who live abroad know, the United States Government taxes all American money, including income and assets earned and stored abroad. Because of this, the Internal Revenue Service created a program the Offshore Voluntary Disclosure Program.
This program was designed to allow Americans for offshore assets to come forward and declare them for limited penalties. The program has been active on and off from 2009, with penalties rising for each passing year revision. The most current version being 2014.
According to the IRS, since the program’s inception, over 56,000 Americans have used it to update their taxes to the current laws. The total amount of money collected via the program has amounted to over $11 billion.
However, the IRS is shutting down the OVDP on September 28, 2018. The IRS reports it is phasing out the program due to “…advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations”.
So, what does this mean for the future?
Future of Taxes on Overseas Accounts
Well, the taxes on overseas accounts will remain the same, even after the program’s closure. However, afterwards, Americans who attempt to keep their overseas assets a secret from the IRS will face much higher penalties and even prosecution. The IRS Criminal Investigation reports that 1,545 taxpayers have been indicted for violations on international activities.
Taxpayers who have an overseas account have until April 15 to file a Report of Foreign Bank and Financial Accounts (FBAR) with the Financial Crimes Enforcement Network of the Treasury. An extension of October 15 is given to those who miss the deadline. A penalty of up $10,000 may be incurred for failure to file a FBAR. A FBAR is required of taxpayers who have authority or interest in one or more accounts based outside of the United States and the value of all accounts exceeds $10,000 at any point throughout the year.
Those who are required to submit a FBAR will likely need to file a Form 8938, a statement of specified foreign financial assets, with the IRS. A Form 8938 is required for the following:
- Single taxpayers residing internationally with foreign financial assets amounting to $200,000 or more on the last day of the tax year or if assets go exceed $300,000 any point throughout the year.
- Couples with amounts double that of a single taxpayer, respectively. S0 $400,000, & $600,000.
- Single taxpayers living domestically with foreign financial assets over $50,000 on the last day of the tax year or assets exceeding $100,000 at any point throughout the year.
Americans should be sure to maintain up-to-date tax reporting, as the IRS has become very aggressive over the last decade when it comes to foreign assets. This has even caused many Americans to renounce their citizenship. CNBC reports over 5,000 Americans gave up citizenship in 2016 and 2017. If you have avoided paying taxes on your foreign assets, be sure to follow the steps listed above and go to irs.gov to ensure you can update your owed-taxes, as you might face penalties otherwise.
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