IRS Continues to Pursue Non-Reporting Foreign Account Holders
In July 2014, the IRS published new Streamlined Domestic Offshore Procedures. The streamlined program updates the Offshore Voluntary Disclosure Initiative (OVDI). Under the Streamlined Domestic Offshore Procedures, taxpayers may disclose their offshore holdings by filing up to six years of prior year Foreign Bank Account Reports and three years of amended tax returns and pay a reduced penalty.
Non-willful conduct, which is a subjective concept, is eligible for the streamlined program. Taxpayers that start out as non-willful can become willful if it is clear that they became aware of the laws and continued to file incorrect returns after they became aware. A case cited in a recent St. Louis Business Journal article illustrates that the IRS continues to pursue these cases.
With FATCA coming into full force in 2014, the IRS will soon gather significantly greater data that will allow them to pursue additional cases. Therefore, it is imperative for taxpayers with unreported offshore accounts to take some action prior to either filing tax returns with additional erroneous reporting or the IRS obtaining information pursuant to FATCA.