Disclosure of Offshore Accounts: What New York Taxpayers Need to Know

Under federal law, taxpayers who own qualifying offshore accounts are required to disclose these accounts to the government annually. In fact, in many cases, taxpayers will have two separate annual offshore account disclosure obligations. Noncompliance with these obligations carries steep penalties and can trigger a high-risk IRS audit or investigation. Learn more from New York offshore tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.

The Federal Offshore Account Disclosure Requirements

The federal offshore account disclosure requirements exist under the Foreign Account Tax Compliance Act (FATCA) and the Bank Secrecy Act (BSA). Here is a brief overview of the key provisions of each of these statutes:

Offshore Account Reporting Under the Foreign Account Tax Compliance Act (FATCA)

• Threshold(s): Taxpayers must report their “foreign financial assets,” including offshore accounts, if the aggregate value of these assets exceeds $50,000 on the last day of the tax year or $75,000 at any point during the year (increased thresholds apply to taxpayers living abroad and married taxpayers filing jointly).
• Form: Taxpayers that are subject to FATCA’s offshore account disclosure requirement must file Form 8938 with the Internal Revenue Service (IRS).
• Deadline: Form 8938 is due when taxpayers file their annual tax returns with the IRS.
• Penalties: Civil penalties start at $10,000 and can increase to $60,000. Criminal penalties may also apply.

Offshore Account Reporting Under the Bank Secrecy Act (BSA)

• Threshold(s): Taxpayers must report their offshore accounts if the aggregate value of these accounts exceeds $10,000 at any point during the calendar year.
• Form: Taxpayers that are subject to the BSA’s offshore account disclosure requirement must file a Report of Foreign Bank and Financial Accounts (FBAR) with the Financial Crimes Enforcement Network (FinCEN).
• Deadline: FBARs are due on April 15, subject to an automatic six-month extension.
• Penalties: Civil penalties vary for willful and non-willful violations. Criminal penalties may also apply.

Options for Resolving Offshore Account Disclosure Violations Without an IRS Audit or Investigation

Since the penalties for noncompliance with FATCA and the BSA accrue immediately, taxpayers cannot simply ignore past offshore account disclosure obligations or wait for next year’s filing. Instead, they must take a proactive approach to mitigating their liability (and their risk of facing an IRS audit or investigation). In this scenario, there are two primary options:

IRS Streamlined Filing

Submitting a streamlined filing is an option for taxpayers who have inadvertently filed an FBAR or Form 8938. The IRS has established separate streamlined filing compliance procedures for taxpayers living in the U.S. and taxpayers living abroad.

IRS Voluntary Disclosure

Submitting a voluntary disclosure is an option for taxpayers who have willfully committed offshore account disclosure violations. Strict filing procedures apply here as well, and taxpayers must work closely with their legal counsel to ensure that they receive protection from criminal prosecution.

Request a Confidential Consultation with New York Offshore Tax Lawyer Kevin E. Thorn

If you need to know more about the options for resolving offshore account disclosure violations, we encourage you to contact us promptly. To request a confidential consultation with New York offshore tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 914-534-6004 or contact us confidentially online now.