IRS Aggressively Monitors Off-Shore Financial Activity
Trying to save money on your individual income or business tax return? Be careful about harboring funds in undeclared foreign accounts.The IRS began cracking down on U.S. citizens who don’t report their off-shore accounts to avoid paying taxes. Learning this news, more than 54,000 U.S. taxpayers participated in IRS limited-amnesty programs over the past six years.Through the Foreign Account Tax Compliance Act (FATCA), the IRS now exchanges financial account data with foreign tax authorities. So far, the IRS:
- received information on U.S. taxpayers’ accounts from approximately 70 countries, and
- sent information on foreigners’ accounts to about 34 countries.
If foreign financial institutions (FFI) do not comply with FATCA, they face heavy penalties.Participating FFIs verify and disclose account holder information to the IRS. As part of the agreement, FATCA imposes a 30% withholding tax of U.S. source income from noncompliant account holders or non-participating FFIs.Oftentimes, the foreign tax agency collects financial data and sends it to the IRS. Some worry this new regulation may compromise sensitive financial information.Financial firms must report accounts holding $50,000 or more. Failure to report results in a $10,000 fine. Subsequent penalties of $10,000 per month (up to a maximum of $50,000) may accrue for not responding to an IRS notice to report within 90 days.FATCA inspired other countries to push for similar legislation, called Common Reporting Standard (CRS). The CRS would allow certain countries to exchange tax data digitally by 2018.If you own an overseas account or possess signing power and don’t know if you need to report it, contact the tax accountant team at Patrick & Robinson CPAs for help: (904) 396-5400 or Office@CPAsite.com.
