Unreported Foreign Income, Assets, and Financial Accounts

What Foreign Assets Must I Report to the IRS?

Unreported foreign income, assets, and accounts are subject to substantial penalties that can exceed the value of the assets.

Most taxpayers inadvertently violate these rules, which is why the IRS has disclosure programs for such taxpayers to achieve compliance.

Our veteran team of foreign tax attorneys and professionals at Kugelman Law can guide you through unreported foreign income disclosure to achieve compliance and avoid any potential harsh penalties.

What is a U.S. Taxpayer’s Reporting Obligation for Foreign Income or Assets?

A U.S. taxpayer’s global income is subject to U.S. income tax and must be reported on a tax return. U.S. tax laws require U.S. taxpayers to report – regardless of income generated – foreign bank accounts, certain foreign assets, ownership in foreign businesses, and gifts from a foreign person or trust.

Penalties for Unreported Foreign Income

The penalties for unreported foreign income can be extremely severe. In fact, they can oftentimes exceed the value of the assets.

Part of the reason why penalties for unreported foreign income are so steep is because the IRS wishes to discourage people from thinking they can get away with not paying taxes on foreign income by hiding it.

Reporting Foreign Financial Accounts and Assets

In addition to reporting your entire global income, you are also required to report any foreign financial accounts on an FBAR and sometimes Form 8938.

Further, other foreign assets may need to be reported on different foreign information returns. Failure to report accounts, assets, or gifts can lead to substantial penalties.

What to Do if You Have Unreported Foreign Income or Foreign Financial Accounts?

The IRS has developed disclosure programs to encourage taxpayers to disclose unreported foreign items and achieve compliance.

Generally, these programs require a taxpayer to file missing or amended returns, explain the reasons for noncompliance, and pay additional tax (and reduced penalty). Taxpayers that are accepted into these disclosure programs typically avoid the most severe penalties associated with unreported foreign income or assets.

The following voluntary disclosure programs are available to help you disclose your foreign income:

• Streamlined Offshore Filing Procedures
• Delinquent FBAR Procedures
• Delinquent Foreign Information Procedures

Kugelman Law Attorneys Can Guide You Through Disclosure to Achieve Compliance and Avoid Harsh Penalties

We have guided our clients through the various foreign disclosure procedures. We take a conservative approach to be certain that all items are reported and the taxpayer participates in the appropriate disclosure program.

By working with Kugelman Law, you will benefit from the tax expertise of our lawyers who have helped clients throughout the world just like you.