Over the past several years, we have worked with a large number of Americans living abroad who needed to get into tax compliance with the IRS. The number of Americans with an urgency to get into compliance has multiplied exponentially since the introduction of the Foreign Account Tax Compliance Act (FATCA).
As you may know, FATCA requires that foreign banks send U.S. account holders’ account information, including interest income, to the IRS. Many Americans who had not been reporting these accounts began to panic when they fully understood the penalties for non-compliance. They knew that if they didn’t disclose their foreign accounts and associated income, their foreign bank would send the information to the IRS. Once the IRS receives the data from the foreign banks, they cross-reference it with the taxpayers’ tax returns and Report of Foreign Bank and Financial Accounts (FBARs).If the account and/or associated income was not reported by the taxpayer, the IRS has all they need to audit the taxpayer and assess tax, interest, and/or penalties, or criminally prosecute if appropriate.