We are already well-past the September deadline for reporting overseas assets to the IRS.
Fortunately, there are still options available for clients with offshore accounts or investments who failed to comply with the tax amnesty’s provisions.
If a client can demonstrate that their failure to report foreign assets was not willful, and if they meet certain other requirements (for example, the IRS has not already launched an official examination of the case), it is still possible to file. The key matter for the tax authorities revolves around ‘willfulness’. If a person files an asset report via this procedure and the IRS determines their original failure to file was willful, it can still file criminal charges. Advisors and clients alike must beware.
If a person failed to comply with overseas reporting requirements, but paid their income taxes in full, the IRS tends to be lenient in allowing the delinquent filing of overseas asset reports. Good cause for the delinquency must be given and the client must step forward before the IRS itself takes action. Urgent, proactive steps to comply must be taken by the taxpayer. The IRS apparently pays close attention to the matter of voluntary disclosure of compliance errors, so it’s best to step forward with alacrity.
One tricky new issue involves cryptocurrencies. For some investors, it’s hard enough to define what these are, let alone where they legally reside. A court recently declared that cryptocurrencies are defined as overseas assets if they are traded on an exchange established outside the US. Advisors should probably consult with legal counsel to clarify the issue and stay apprised of developments.
The key issue is this: if any of your clients missed the deadline, have them file as close to immediately as possible. Any resultant pain will be less severe than what the IRS can inflict if they catch someone, by their standards, red-handed.
For more information, please read:
Clients Who Missed Tax Amnesty Deadline Still Have Options | Financial Advisor