The U.S. is launching a stiff crackdown on Americans who shield income from the tax man in foreign accounts. The new campaign could net tens of thousands of tax evaders, according to a report in the Wall Street Journal ($) Monday.
Taxpayers with $10,000 or more in offshore accounts at any point during the year will be required to file a tax form called the Foreign Bank Account Report, or FBAR. People who owe back taxes can expect some tough penalties. And for those who fail to file the form altogether, the penalties will be much greater.
The IRS has set a Sept. 23 deadline for voluntary disclosure of offshore accounts, a program announced in the spring. People who inadvertently failed to disclose foreign income, however minimal, could be slapped with a $10,000-a-year penalty.
Those who knowingly evaded paying taxes could pay $100,000 a year, or half of the offshore account's value – whichever is higher.
The incentive for coming forward? People who disclose their accounts voluntarily before the deadline won't face criminal prosecution.
There were 386,000 FBAR forms filed last year but that number is expected to dramatically increase this year, according to the report. Tax lawyers and accountants are swamped by requests for help from those afraid of getting caught.
Not only does the IRS want its money, it also wants to know who else is involved in setting up Americans with offshore accounts in the first place. Those who come forward will face questions about how they're money ended up overseas.
The IRS will separate the voluntary filers into two groups, according to the report. One will be Americans who haven't been paying taxes at all on foreign income. The other will be those who have been paying taxes, but not filling out an FBAR form.