Australia’s wealth, scenic wildlife, lack of language barriers, and vibrant culture have made it a popular destination for countless American expatriates. However, as a US expatriate living and working in Australia, you are still subject to US tax reporting requirements. If you fail to comply with these requirements, you may find yourself facing enormous civil penalties or even the prospect of criminal prosecution by the Department of Justice.
Certified Public Accountant Ted Kleinman of US Tax Help has more than 20 years of experience helping expatriates navigate the complexities of the tax code. Whether you need help catching up on unfiled taxes, understanding FBAR filing requirements and procedures, participating in the OVDP, or simply want to minimize your liabilities and take advantage of credits and deductions, US Tax Help is here to assist you.
To arrange for a confidential consultation, call Ted Kleinman today at (800) 810-9312.
Do You Need to File an FBAR?
From a tax reporting standpoint, the federal government does not care that you currently reside in Australia: as a US person, you are nonetheless required to report global income to the United States. For taxpayers who meet certain thresholds, this means filing a timely and accurate FBAR (Report of Foreign Bank and Financial Accounts). You will be required to file an FBAR if both of the following statements apply to you:
- You are a US person who either holds signature authority over, or has a financial interest in, a foreign financial account.
- The value of your foreign accounts exceeded $10,000 at any time during the calendar year to be reported.
If both of the above statements are true, you must disclose your foreign accounts to the US government by filing an FBAR via FinCEN Report 114, an online form under the BSA E-Filing System, which has been updated to replaced the previous TD F 90-22.1 form.
If you meet the above description and fail to disclose your accounts by filing an FBAR, you face a penalty of $10,000 per non-willful violation. The penalties for willful violations are even more devastating: up to $100,000 per violation, or 50% of the balance in the taxpayer’s account when the violation occurred — whichever penalty is larger.
Avoid Criminal Prosecution with the OVDP
All too many taxpayers make the mistake of assuming the IRS will pass them over for criminal prosecution because there are “bigger fish to fry.” Unfortunately for taxpayers with this mindset, the IRS has become increasingly vigilant and proactive in its investigations of suspected tax evasion, tax fraud, and other acts of noncompliance. In particular, in recent years the IRS has increased its efforts to investigate American expatriates and other US taxpayers holding undisclosed offshore accounts with foreign financial institutions, or FFIs.
In instances where a taxpayer’s conduct is determined to be “willful,” the case could be referred to the Department of Justice for criminal prosecution. In fact, the IRS reports an average of approximately 3,000 prosecutions per year — a sobering figure which averages out to more than eight new cases each day. The IRS’ reach is further extended by increasingly powerful and intelligent technology, such as “E-Trak” software designed to identify holders of undisclosed offshore accounts.
Should prosecution for tax crimes eventually lead to a conviction, the unlucky taxpayer could be facing tens of thousands of dollars in fines and years of incarceration. Pursuant to 26 U.S. Code § 7201, “Any person who willfully attempts in any manner to evade or defeat any tax… or the payment thereof shall… be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”
But what if you could avoid criminal prosecution? You may be able to do exactly that by participating in an IRS program called the OVDP, or Offshore Voluntary Disclosure Program (sometimes referred to as the OVDI, or Initiative). In the IRS’ own description, this invaluable program “enables noncompliant taxpayers to resolve their tax liabilities and minimize their chance of criminal prosecution. When a taxpayer truthfully, timely, and completely complies with all provisions of the voluntary disclosure practice, the IRS will not recommend criminal prosecution to the Department of Justice.”
However, participating in the OVDP is an important decision which should never be rushed into. Before you make a disadvantageous statement to the IRS and potentially compromise your legal and financial interests, you should always consult with an experienced CPA who can walk you through the program details, and help you explore the potential paths back toward compliance.
You will lose your opportunity to participate in the OVDP if the IRS has already begun a criminal investigation, so don’t delay until it’s already too late. To set up a private consultation with international CPA Ted Kleinman, call US Tax Help today at (800) 810-9312.