IRS Will Waive Penalties Related to Overseas Accounts

Monday, July 14, 2014
There is good news for U.S. citizens who live abroad and have neglected to pay their federal income taxes.   U.S. citizens living outside the U.S. are still required to file a tax return, even if they only have foreign bank accounts.  They are able to deduct taxes on their federal tax return if they paid foreign taxes where they reside. The penalties are steep if not reported, nearly $10,000 or more depending on the case.  The IRS is expecting thousands of U.S. citizens to take advantage of this new strategy.

In order to increase tax compliance and disclose off-shore hidden accounts, the IRS has just announced that they plan to waive hefty penalties for U.S. taxpayers living overseas with foreign accounts. 

However, they must prove that they didn’t purposely evade taxes.  Those living overseas can get the penalties waived by filing tax returns for the past three years and making payments on any back taxes owed.  In addition, if they live in the states, they can disclose their foreign bank accounts and pay only 5% of the accounts asset as the penalty. 

On the other hand, if a U.S. citizen is purposely evading paying federal income taxes, they will face steeper monetary penalties, yet they will avoid any criminal prosecution.

The IRS suggests consulting with a tax professional, such as a tax attorney if they are conflicted about this.  The Strategic Tax Lawyers can provide a free consultation about foreign accounts and taxes due.  Contact the Strategic Tax Lawyers at (800) 669-4775.