Tampa Federal Criminal Defense Lawyer

 Foreign account ownership and the IRS

Mar 11, 2021 | Federal Crimes

Everyone is expected to pay their taxes and Internal Revenue Services does not take it kindly when there is no remittance of taxes. The obligation to pay taxes is mandatory whether your income was generated in the country or abroad. Through the Report of Foreign Bank and Financial Accounts (FBAR), a US citizen who has accrued money or property amounting to $10,000 and above, must declare such revenue.

How the IRS detects a failure to report foreign account ownership

The IRS is not omniscient, therefore they are only able to detect non-declaration of any money in a foreign account that ought to have been declared. There are various modes that IRS has used to crack down on foreign accounts and they include:

1. Whistleblowing and whistblowers’ incentive

Bradley Birkenfeld is a fairly famous name. His action to whistleblow on the Swiss banking system led to the unraveling of many concealed American bank accounts. The culpable individuals were prosecuted criminally and pursued in the civil courts as well. Bradley’s tip was not only useful. It was also lucrative. He was rewarded $104,000,000 (yes, 104 million) as an incentive to any other potential whistleblowers. Further, the passing of the Criminal Antitrust Anti-Retaliation Act of 2019 that protects whistleblowers from victimization further emboldens the IRS in its crackdown.

2. Bilateral and multilateral agreements

The Foreign Account Tax Compliance Act (FATCA) has a requirement that demands that financial institutions must disclose to the IRS any accounts that are held by American citizens. Through this knowledge, the IRS would be able to ascertain if a person has disclosed all their earnings. Failure to comply with FBAR results in a strict liability offense.

Provided a taxpayer has failed to report their earnings, they would be culpable.  Even in situations where there was an unintentional oversight, the IRS would still clamp down hard on the defaulter. The situation is even more severe if it can be proved that there was a deliberate attempt to withhold reporting the amounts.

In order to avoid the stiff penalties that are attached to the non-reporting of foreign accounts, you need to regularly ensure that amounts meeting the FBAR threshold are promptly reported.


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