IRVINE, Calif., July 1, 2020 /PRNewswire/ — A surprising number of taxpayers make the mistake of thinking that there is no need to disclose foreign information and offshore income on their tax return because the money and income generating assets are not located in the U.S. and many incorrectly assume thus out of reach of the IRS. Moreover, out of a misguided fear that an offshore inheritance or gift will get taxed in the U.S. if reported, offshore gifts and inheritances that give rise to the offshore income generating assets or offshore funds go undisclosed on form 3520. These omissions, especially where deemed willful, can have very serious life altering repercussions, including criminal tax and information reporting exposure.
Most foreign banks are complying with FACTA and voluntarily reporting U.S. taxpayers that have offshore bank accounts and annually supply such information to the IRS. This offshore reporting can very easily lead to an offshore foreign account audit. If you are audited or criminally investigated, and the IRS finds out you did not disclose your foreign income, accounts, or assets, you could face severe civil and criminal penalties in addition to being required to pay what you owe. Those who have failed to adequately disclose this information can be brought into compliance, potentially through the expat or domestic streamlined disclosure program or the traditional offshore voluntary disclosure program.
How Do I Properly Report Income Earned Abroad?
Income earned abroad can be reported on your tax returns in the same way you usually report your U.S. income. If you fail to report income earned abroad, and this is discovered during an audit or criminal tax investigation, you could face severe penalties, including a potential referral to the department of justice income tax division for criminal prosecution.
Even if you have willfully committed tax crimes, self-reporting the fraud through a voluntary disclosure program before the IRS has started an audit or criminal tax investigation will usually result in the taxpayer being brought back into compliance without ever facing criminal tax prosecution.
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Public Contact: Dave Klasing Esq. M.S.-Tax CPA, [email protected]
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SOURCE Tax Law Offices of David W. Klasing, PC