by Brian Mahany
August 31st. The very day the IRS offshore tax amnesty plan was to end – the program was extended until September because of Hurricane Irene – the Vancouver Sun ran an article about the tax risks faced by Americans living in Canada. While much of the mainstream media has focused on “secret Swiss” accounts, many Americans that live in Canada also bank in Canada. If those folks didn’t tell Uncle Sam about their foreign accounts, they could face the loss of 50% or more of the highest account value.
Many Americans living in Canada or abroad simply don’t know that they have filing and disclosure obligations in the U.S. even if they don’t live here or pay taxes in another country.
Americans holding Canadian tax deferred accounts and RRSP’s, RESP’s, TFSA’s and brokerage account must report those accounts if their value exceeds $10,000.
Everyday we speak to several people who mistakenly believe they didn’t have to report their accounts because they don’t live here, paid taxes elsewhere, never brought the money into the U.S or because the account generated no income. In most cases, that unfortunately just doesn’t matter.
The penalties for not reporting those accounts can be as high as 5 years imprisonment and a penalty 50% of the highest account balance. What’s more, the IRS can go back 8 or more years on unreported accounts. Even non-willful violations are subject to very high fines.
Presently there is an amnesty program for taxpayers with foreign bank and financial accounts. The program, called the Offshore Voluntary Disclosure Initiative or “OVDI”, allows participants to pay a reduced penalty of 25% and sometimes much less. The caveat, however, is that the program ends on September 9th. Because materials need to be in the hands of the IRS by the deadline, most tax lawyers won’t even touch a case now. Some, like Mahany & Ertl, will still take cases but time is simply running out.
While many columnists and reporters have expressed disappointment with the heavy handed tactics of the IRS (Editor’s note – the IRS is not alone, many other governments are equally aggressive), few have expressed themselves as well as the Vancouver Sun. They said,”The goal of this recent push by the IRS to enforce these rules is to nab wealthy Americans who are trying to escape taxation by hiding assets offshore and we fully support measures to crack down on fraud and tax evasion. But the agency has cast the net too wide and will catch more minnows than sharks, punishing innocent people who owe the U.S. government nothing.
“Canada’s American residents, some of whom hold dual citizenship, should not have to live in fear of ruinous penalties as a price for holding a U.S. passport.
“Tax collectors have suffered from an unsavoury reputation since the New Testament lumped them in with sinners. But it’s not too late for the IRS to show a little heart by cutting U.S. innocents abroad some slack.”
We couldn’t have said it better ourselves.
Virtually every taxpayer that has called us in recent weeks had absolutely no idea of the foreign reporting requirements. Many received poor advice from accountants meaning even the professionals were confused or caught of guard by these laws.
If you have unreported offshore accounts and are a dual national, American living abroad or foreign national living here with a green card, call us immediately. By this time next week it will be too late to participate in the amnesty program.
Our tax lawyers can represent you at every stage including the complex amnesty application process, amending of all returns, preparation of Reports of Foreign Bank and Financial Accounts (FBAR’s), penalty negotiation, “opt out” decisions, IRS appeals and even U.S. Tax Court. Often our representation is offered on a flat fee basis.
For more information, contact attorney Brian Mahany at (414)704-6731 (direct) or by email at
Mahany & Ertl, LLC – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland,Maine & San Francisco, California. Tax services performed nationwide and beyond.