by Brian Mahany
We have written many articles on Indians caught up in the IRS’s quest to ferret out unreported foreign accounts. Most of our clients simply made an honest mistake. Many foreign born Americans, dual nationals and Indian Americans who send money to family in India simply didn’t understand the requirement to file FBARs and report their accounts. (An FBAR is a Report of Foreign Bank and Financial Account that must be filed annually with the IRS.)
Last year, some Indian politicians sent harsh protests claiming that the enforcement of the law was essentially criminalizing innocent behavior. The civil penalties for not reporting a foreign account are so high that many taxpayers face a Hobson’s choice – play audit roulette and hope they don’t get caught or pay a penalty as high as 27.5% of the highest foreign account balance as part of the current amnesty program, the 2012 Offshore Voluntary Disclosure Program.
It’s a little ironic, then, that several months later the India Income Tax Department says it is posting agents in offshore tax havens hoping to catch Indians moving money from India.
Opening a foreign account isn’t illegal but many governments, including the U.S. and India, want to know where your money is kept. In addition to posting agents on foreign soil, India is also now doing the same thing as Uncle Sam, getting other countries to sign tax information exchange agreements.
The world gets smaller every day. The level of cooperation among world powers is at an all time high. Even if you don’t get by the IRS, chances are that you will be caught by another country and turned in to U.S. officials.
If you have unreported accounts, the smart thing is to take advantage of the current amnesty. If you can demonstrate that your failure to report wasn’t willful, speak to a qualified tax attorney about a traditional disclosure or opt out. Waiting until you get caught, however, is not an option.
The IRS works on a first contact policy. If they find you first, your ability to negotiate and avoid criminal prosecution is severely hampered.
The tax lawyers at Mahany & Ertl have helped many taxpayers with a wide variety of offshore tax reporting issues – FATCA compliance, FBARs, OVDI amnesty, opt outs, foreign corporation reporting and even criminal investigation defense. For a no obligation, confidential consultation, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
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