The “Emerald Isle” is known for its lush natural beauty, rich cultural traditions, bustling cities like Dublin and Cork, and economic success. Ireland is one of the wealthiest member countries in the Organization for Economic Cooperation and Development (OECD), with a bustling economy focused on investment and trade. Thanks to this combination of striking scenery, financial promise, and the prevalence of the English language, Ireland has become a popular destination for American expatriates from all walks of life.
If you’re a US expatriate living in Ireland, you are still required to comply with provisions of the Internal Revenue Code (IRC) by federal law. Depending on your financial circumstances, you may be subject to special reporting requirements pertaining to FBAR (Report of Foreign Bank and Financial Accounts). If you have a tax compliance issue, you may be able to obtain relief from civil penalties and even criminal prosecution by participating in the OVDP (Offshore Voluntary Disclosure Program).
Whether you simply need assistance navigating through filing requirements, or you have concerns about concealed assets and IRC compliance, international CPA Ted Kleinman can help. Ted has more than 20 years of experience working with expatriates in Ireland and around the globe, and will guide you through all pertinent IRS requirements while working to protect your financial interests. To set up a confidential consultation with Ted, call US Tax Help right away at (800) 810-9312.
Exit Tax: Are You a Covered Expatriate?
While expatriates may no longer physically reside within the boundaries of the United States, this does not necessarily sever financial ties to the U.S. On the contrary, even expatriates are bound to report income to the Internal Revenue Service or IRS. Certain portions of the Internal Revenue Code (IRC), notably IRC 877 and 877A, set forth tax obligations for expatriates and long-term residents “who have ended their US resident status for federal tax purposes.” US citizens and residents abroad must comply with US tax laws.
The IRS considers you a “covered expatriate” if (1) you expatriated from the US to Ireland on or after June 16, 2008, and (2) you answer yes to any of the following questions:
- Consider the five years leading up to your expatriation. During those five years, did your average yearly net income tax exceed the following amounts?
- 2011 — $147,000
- 2012 — $151,000
- 2013 — $155,000
- 2014 — $157,000
- On the date you expatriated to Ireland, was your net worth at least $2 million?
- Did you fail to indicate to the IRS, using Form 8854 (Initial and Annual Expatriation Statement), that you obeyed all tax reporting requirements throughout the five years leading up to the date of your expatriation? This might include:
- Failure to file or pay taxes.
- Failure to report income to the IRS.
Unfortunately, there can be negative financial consequences to covered expatriate status. For example, any gifts or bequests you make to US residents are generally subject to a debilitating 40% tax liability.
The IRS’ OVDP Program: Do You Need to File an FBAR?
The IRS, which frequently works with the Department of Justice (DOJ), has gained a certain notoriety for driving US tax law into international territory.
For example, in early 2013, the US Attorney’s Office in the Southern District of New York obtained a guilty plea to “conspiring to defraud the United States by helping US account holders hide assets from the IRS in undeclared accounts” from Swiss bank Wegelin. The IRS and DOJ are unafraid to aggressively pursue not only individual taxpayers who are suspected of tax evasion and other acts of noncompliance, but also any foreign financial institutions (FFIs) which aid in those efforts — no matter how old or firmly established.
While Switzerland is exceptionally well-known for being a tax haven, Irish banks and expats to Ireland are certainly not invulnerable to IRS investigations — nor are they impervious to criminal prosecution. As a US expatriate, you are required to report your income by filing an FBAR if you had signature authority over or interest in any foreign financial account with an aggregate value exceeding $10,000 at any point during the tax reporting year.
If you meet these requirements yet fail to file an FBAR, the penalties can be severe — particularly if such failure was intentional or “willful.” Even non-willful failure to file FBAR can result in a maximum $10,000 civil penalty per violation, while willful failure can lead to the imposition of a $100,000 penalty or half the value of the account, whichever figure is larger. For some individuals, this 50% account value — and financial loss — is considerably greater than $100,000.
Yet more alarming for noncompliant expatriates is the risk of criminal prosecution and consequent incarceration. Consider the following criminal penalties for various tax crimes:
- Tax Evasion
- Fine — $250,000
- Sentence — 5 years
- Filing a False Return
- Fine — $250,000
- Sentence — 3 years
- Failure to File a Return
- Fine — $100,000
- Sentence — 1 year
- Failure to File FBAR
- Fine — $500,000
- Sentence — 10 years
Fortunately, it may be possible for you to dramatically reduce your risk of criminal liability by participating in a special IRS initiative called the Offshore Voluntary Disclosure Program (OVDP). (Note the “Program” is sometimes called the “Initiative,” or OVDI.) While the application of the term “amnesty program” is debatable, as albeit reduced penalties still apply, participation in the OVDP has proven tremendously beneficial for countless taxpayers. Most importantly, the OVDP can help keep you out of prison.
If you’re a US expatriate living in Ireland and you need assistance with any aspect of your tax obligations, or if you’re planning on expatriating soon and wish to review your changing tax liabilities before you depart, CPA Ted Kleinman can help you understand your options, rights, and responsibilities.
To arrange for a private consultation with Ted, call US Tax Help at (800) 810-9312 today. Ted also assists US expats in the United Kingdom, including England, Scotland, and Wales.