Have you ever had income from a foreign bank account that wasn’t reported on your U.S. income tax return? That income is subject to U.S. tax and the Internal Revenue Service is stepping up enforcement by going directly to the source, foreign banks, to obtain names of U.S. citizens that hold these accounts to cross check the reporting of the income.
A settlement offer was recently announced by the IRS to encourage compliance, and the agency has just announced that it is postponing the deadline for taxpayers to act on its settlement offer to report previously unreported offshore income. This is a “one-time only” postponment from September 23, 2009 to October 15, 2009.
Earlier in the year, the IRS provided the following settlement for all taxpayers that make voluntary disclosure requests:
1) The taxpayer must file amended returns going back 6 years (2003 to 2008) and pay taxes and interest.
2) IRS will assess either a delinquency penalty or an accuracy penalty and no reasonable cause exception will apply.
3) A penalty equal to 20% of the amount in a foreign bank account in the year with the highest aggregate account or asset value will be assessed, in lieu of other penalties that may apply.
The IRS has indicated that no further extensions will be provided and that taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties and where applicable, criminal prosecution.