[Post updated 2019] An article in the Australian Financial Review claims that the IRS is ramping up its activities in Australia. According to the article, the IRS is “scrutinizing the tax affairs of United States citizens living in Australia with renewed intensity, as the worldwide battle to shore up dwindling government tax reserves heats up.” The source of their story is Australian accountants.
We aren’t surprised by the headline. In fact, the IRS is searching worldwide for unreported income and unreported foreign accounts. Obama’s FATCA legislation (Foreign Account Tax Compliance Act), passed in 2010 and delayed several times, is now in full effect. That means foreign financial institutions must report accounts belonging to U.S. taxpayers. Even if an American only has signature authority over an account, it still must be reported to the IRS.
Fast forward to 2019 and the IRS FATCA reporting structure should not be catching anyone by surprise. This includes American expats, dual nationals and green card holders. Simply because a U.S. citizen holds a second citizenship or resides overseas doesn’t change the reporting requirements.
Since the early 1970’s, U.S. taxpayers have been required to report foreign accounts but compliance was spotty. FATCA now makes foreign banks, brokerage firms and other financial institutions the eyes and ears of the IRS.
Penalties for not reporting foreign income are steep. The penalties for an unreported offshore account are even higher. The latter can involve prison and civil penalties of up to $100,000 or 50% of the highest account balance if the IRS deems the nonreporting to be “willful.” Even nonwillful violations can carry penalties of $10,000 per year.
With the increased penalties come new whistleblower opportunities. As we live in an increasingly mobile society, we expect to see cross border tax evasion to increase.
Since 2013, the Australian Tax Office and the IRS have been cooperating and sharing information. Because it is still easy to hide assets using shell companies or in nominee names, there are likely to be many whistleblower opportunities for years to come.
In 2017, Paul Hogan (Crocodile Dundee) was in the news with his quite public dispute with the Australian Tax Office. Tax disputes are rarely made public because of strict confidentiality laws. They only become public upon an indictment or a court battle.
Dundee told reporters he was did not payoff the tax agency to settle a reported $150,000,000 tax debt. In an interview, he called tax officials “boofheads”and said the American IRS, British and Australia Tax Office looked up his “quoit” (anus) for years and found nothing.
IRS Whistleblower Programs Awards
Under the IRS whistleblower program, people with inside knowledge of tax cheats can receive large cash rewards. The amount of the award is based on how much the government collects.
Of particular concern to Americans living in Australia or Australians living in the United States are superannuation accounts. The Australian Taxation Office provides special tax treatment to Australian self-managed superannuation funds (SMSF) but the IRS does not. Under the Internal Revenue Code, income from SMSFs is taxable as ordinary income.
FATCA and America’s unique offshore reporting rules have certainly created a tremendous amount of confusion. That doesn’t let taxpayers off the hook, however.
If you have knowledge of an unreported foreign account or foreign income, give us a call. Are services are confidential and protected by the attorney – client privilege. Whistleblowers anywhere in the world are eligible for rewards, even if they are not a U.S. citizen. valuable worldwide and in many instances can be offered on a flat fee basis. Our initial consultations are free and without obligation. For more information, contact attorney Brian Mahany at or by telephone at (414) 223-0464.
MahanyLaw – America’s FATCA Lawyers