Seemingly gone are the days when wealthy, or simply stealthy, individuals were able to open and effectively hide assets in Swiss and other foreign bank accounts. This is due mostly in part to the Foreign Account Tax Compliance Act, better known as FATCA, which became law in March of 2010.
The basic premise of FATCA is to ensure that U.S. residents with foreign assets totaling in excess of $50,000 report and pay taxes on these assets. In addition to requiring that individuals with a qualifying amount of foreign assets abide by FACTA’s reporting terms, third-party foreign financial institutions are also required to provide information to the Internal Revenue Service including an account holder’s identity and the total value of assets being maintained abroad on his or her behalf.
Recently, the IRS boasted that, thanks to FATCA, the agency has netted $8 billion in revenue from foreign account and asset holders. A sizable portion of these billions is likely attributable to some 54,000 taxpayers who have come out of the shadows and taken action to get right with the IRS and disclose the existence and true value of their foreign accounts and assets.
For those individuals who fail to comply with FATCA and the IRS’ existing programs for both willful and non-willful violators, it’s likely only a matter of time before the IRS discovers such assets. In fact, already, the IRS announced that civil audits of offshore financial institutions have netted the agency “tens of millions of dollars.”
Individuals who have yet to notify the IRS of their foreign accounts and assets are encouraged to discuss their situation with an attorney who handles tax matters. Failure to comply with FATCA can result in one incurring hefty penalties and possibly facing criminal charges related to tax evasion.
Source: Forbes, “IRS Offshore Programs Produce Billions – Come In And Participate Or Else …,” Josh Ungerman, Nov. 1, 2015