Most of what you've read online about IRS problems is wrong, or at least misleading. I'm Darrin Mish. I practice tax law in Tampa and I've been doing this for 32 years. Here's what's actually true.<\/p>\n
The IRS recently announced some welcome news regarding taxes to be paid by those having taxable income offshore like expatriates and dual citizens<\/a>, many of whom have not been declaring their taxable income to the IRS or filing Foreign Bank and Financial Account reports (FBARs). These taxpayers very likely have been paying taxes to their host country\u2019s governments. But US tax laws state that all Americans must declare their worldwide income to the IRS regardless of whether they are paying taxes in their host countries or otherwise be subject to interest charges and penalties. \u00a0Click here to watch or read more information on IRS Back Taxes.<\/a><\/p>\n The IRS announcement states that starting September 1 this year, you only have to file your delinquent taxes<\/a> for the last 3 years and your Foreign Bank and FBARs for the last 6 years. If you are deemed of low tax compliance risk, the IRS will waive all penalty charges upon reviewing your case. This is in contrast to the previous requirement of 8 amended returns and 8 FBARs. This new ruling is a welcome relief for those who have been living for years in foreign countries such as the UK and especially for the one million or so Americans residing or working in Canada.<\/p>\n There is a question on Schedule B of 1040s that asks if you own or have control over foreign accounts and requires you to report all the income from those accounts. If you do not honestly declare your foreign assets, it is a felony punishable by criminal prosecution. In addition, you must also report your foreign accounts every year to the Treasury by filing a Report of Foreign Bank and Financial Account (FBAR). Willful failure to do so means a fine amounting to the greater of $100,000 or 50% of the balance in an unreported foreign account for each year the FBAR was not filed.<\/p>\n All this much-publicized furor over reporting taxes on offshore accounts came about because of the IRS\u2019 crackdown on tax dodgers who have been using tax havens like Switzerland to hide their taxable income<\/a>. In 2007, California billionaire Igor Olenicoff, who hid more than $200 million in accounts in Swiss bank UBS AG and elsewhere, pleaded guilty as charged. In their efforts to nab tax cheats like Olenicoff, the IRS has so far organized 3 Offshore Voluntary Disclosure Programs (OVDP) since 2009.<\/p>\n The problem is that most Americans living and working abroad and foreigners who obtained green cards and then moved back home (who are not intentional tax evaders) are unaware they have to declare their foreign income and have not even heard of a FBAR. Thus, the only recourse they have is to participate in the OVDP.<\/p>\n But the good news with the recent IRS requirement is that if your amended tax returns for the 3 years show less than $1,500 in tax due in each year, you are deemed to be of low tax compliance<\/a> risk. Chances are you will not be slapped with penalties. But you still have to pay back taxes and interests. However, if you did any complex tax planning or avoidance or if you had high income activity in the US, you might not be termed low tax compliant risk. The IRS say they will release more guidance on this matter in September.<\/p>\n