The Internal Revenue Services (IRS) is tightening the rules on those who do not fess up to hiding money overseas.
The Offshore Voluntary Disclosure Program (OVDP) was adopted in 2009 to help U.S. citizens who did not report financial accounts in foreign countries to comply with the IRS. The program, however, is set to close Sept. 28, according to an IRS press release Tuesday.
While the OVDP was implemented in 2009, it went through modifications in 2011, 2012 and 2014. About 56,000 taxpayers reported assets overseas and came into compliance with the IRS since the program was initiated and over 1,500 people have been indicted for attempting to evade the taxing system.
“These taxpayers with undisclosed offshore accounts have paid a total of $11.1 billion in back taxes, interest and penalties,” the IRS reported.
Holding financial accounts in other countries is not illegal, but the problem arises when taxpayers do not report them. The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to increase transparency between the IRS and U.S. nationals who might have invested and earned income outside the U.S.
“It was brought into being to recognize approximately 8.7 million U.S. citizens staying outside the mainland and believed to be U.S. persons for tax purposes,” according to Hexanika, a software company that focuses on financial topics.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” Acting IRS Commissioner David Kautter said in a statement on March 13. “All along, we have been clear that we would close the program at the appropriate time, and we have reached that point.”
Even though the OVDP is ending, officials will still keep account holders in foreign countries liable through the Streamlined Filing Compliance Procedures (SFCP) and the Foreign Bank and Financial Accounts (FBAR) under the U.S. Department of the Treasury, CNBC reported Tuesday.
The SFCP helped 65,000 additional U.S. taxpayers, either on the mainland or overseas, to pay back taxes they did not know they owed. (RELATED: Political ‘Dark Money’ Goes Pitch Black In IRS And Treasury Rule Change)
The FBAR’s intent is to make sure that U.S. citizens and nationals report the aggregate value of foreign accounts surpassing $10,000. The maximum penalty for not reporting under FBAR can be as much as $10,000. Those who knowingly try to evade the system can face criminal penalties, $100,000 in fines or charged half of the balance in the foreign accounts, the IRS FBAR Reference Guide said.
The stricter tax rules have caused some citizens living overseas to give up their U.S. citizenship, according to a CNBC report. The first quarter of the 2018 fiscal year saw nearly 1,100 citizenships given up.
The Daily Caller News Foundation contacted the IRS through email as requested, but did not receive an immediate response.
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