The U.S. government is taking important steps to limit tax evasion. With the Foreign Account Tax Compliance Act (FATCA), U.S. authorities will soon have the details of the financial activities of Americans overseas. Those who have been evading taxes in the U.S. through secret offshore accounts can come out clean through the Offshore Voluntary Disclosure Program (OVDP).
Why Voluntary Disclose
The main advantage of voluntarily disclosing assets in other countries is that the penalty charged for tax evasion is much less than what the IRS charges to those found guilty of tax evasion. Taxpayers can lessen or remove the possibility of criminal prosecution if they voluntarily report undisclosed foreign accounts and hidden assets to the IRS. Of course, all past taxes will still need to be paid, but harsher punishments, including civil and criminal penalties can be avoided.
The government is looking to increase revenue, and getting the wealthy and large businesses to pay their share of taxes is their top priority. The U.S. has already made deals under FATCA with many countries, including the United Kingdom, Ireland, Mexico, Norway, Denmark, Spain and Germany. Countries under FATCA will now share information about the financial activities of Americans in their country to assist the U.S. in enforcing tax compliance.
Punishment for Tax Evasion
The IRS imposes heavy penalties in cases of tax evasion. Filing a false tax return intentionally can attract a penalty of up to $100,000 and/or three years of imprisonment. Failing to file a tax return can lead to $25,000 penalty and/or one year in prison. A person found guilty of tax evasion can be subjected to a fine of $250,000 and a prison-time of up to five years.
Offshore Voluntary Disclosure Program
To encourage taxpayers to voluntarily disclose their hidden assets overseas, the IRS has again started the OVDP. It is an opportunity for those who want to get back into compliance without being heavily penalized. The IRS begins and closes the OVDP at their discretion.
Labels: Back Taxes, IRS, Tax Filing, Tax News, Taxpayers