Transmenu powered by JoomlArt.com - Mambo Joomla Professional Templates Club

Voluntary Disclosure Program Opportunities for Reporting Foreign Financial Accounts

All income has been reported for indirect foreign ownership, but the TDF has not been filed.

• Form 3520 - Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts
• Form 5471 - Information Return of U.S. Persons With Respect To Certain Foreign Corporations
• Form 8858 - Information Return of U.S. Persons With Respect to Foreign Disregarded Entities
• Form 8865 - Return of U.S. Persons With Respect to Certain Foreign Partnerships

BUT FAILED TO FILE the foreign financial account Form TDF can voluntarily file prior year’s returns under a special voluntary disclosure program. In this case, the Form TDF can be filed without paying any penalties.

All income has been reported for direct US ownership, but the TDF has not been filed.

We believe that taxpayers who have direct ownership of foreign bank and other financial accounts that reported all of the income from those accounts and all of the investment gains in those accounts on Forms 1040, Forms 1120, Forms 1120S and/or Forms 1065 but failed to file the foreign financial account Form TDF may also be able to voluntarily file prior year’s returns under a special voluntary disclosure program without paying any penalties.

Taxpayers that have not reported the income from their foreign financial accounts and have not reported the existence of their foreign financial accounts may participate in a different voluntary disclosure program.

• Pay back taxes due on unreported income for the years 2003 - 2008
• Pay interest on their back taxes
• Pay a 20% accuracy-related penalty or a 25% delinquency penalty for each tax year at issue
• Pay a 20% penalty on the highest aggregate value in the foreign bank accounts during the preceding six years

• The IRS will not pursue criminal tax evasion charges against taxpayers who voluntarily disclose their offshore assets under this new policy
• The IRS will not pursue other penalties it could otherwise assess such as the penalties for failure to file foreign trust Forms 3520 and 3520A, the Information return Form 5471, etc. 
• The IRS will not pursue other penalties against participating taxpayers, such as the annual 75% fraud penalty or the annual civil penalty of the greater of $100,000 or 50% of the foreign financial account balance

The voluntary disclosure program is available until the middle of September. There is essentially a three-step process for this voluntary disclosure program:

The taxpayer's representative contacts the Criminal Investigation Unit (CI) in the taxpayer's state and discloses the taxpayer's name and tax identification number. After a discussion and information gathering the CI agent determines whether the taxpayer is allowed to participate in the program. If the taxpayer is permitted to participate, the CI agent issues a letter indicating this.

The CI agent turns the taxpayer's file over to a Civil Investigation agent. The taxpayer and the taxpayer's representative meet with the CI agent to agree on the data that is to be provided.

The information is submitted to the Investigative Unit in Philadelphia where the data is processed and the taxpayer's liability is finally calculated.

Because these processes take time, we suggest that clients wanting to participate in one of the voluntary programs mentioned above should consider beginning the disclosure process as soon as possible.

If you have any questions about the filing requirements and the voluntary disclosure program procedures, please contact your RubinBrown advisor.

Steven J. Brown, CPA
Partner-in-Charge
Tax Consulting Services Group
314.290.3326
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

 

Linda Paradis, CPA
Partner
Tax Consulting Services Group
314.290.3382
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it