Why Resident Aliens Should Seriously Consider Reporting Foreign Assets
Why Resident Aliens Should Seriously Consider Reporting Foreign Assets
While the IRS enforces many types of non-compliance matters, offshore asset reporting for citizens and residents is one of its key enforcement priorities. In fact, resident aliens especially have to be very cautious when it comes to complying with offshore assets and accounts because if they are out of compliance, it could lead to serious issues, such as not having their green card renewed or losing their U.S. visa status. However, while compliance is important, it is also important to note that the IRS provides several different options for taxpayers who are out of compliance to get back into compliance, so taxpayers should try to avoid any fear-mongering and ‘free FBAR consultations‘ made to lead taxpayers to believe that they are in a worse position than they actually are. Let’s look at some key issues involving resident aliens with offshore assets.
Not Limited to Accounts Opened Post-Residency
It is understandable that resident taxpayers of the United States, but citizens of foreign countries, are unaware that they are required to report foreign accounts and assets that they owned before they became a U.S. person, but they are required to do so; it is not limited to accounts opened after becoming a U.S. person. In other words, even pre-residency offshore accounts and assets are reportable for U.S. tax and FBAR.
*For example, if a taxpayer had 15 accounts before they became a U.S. resident and then opened two accounts as a U.S. resident when they report their foreign accounts to the US government, they would report 17 accounts, not just the two accounts opened after becoming a US resident.
Tax Compliance Can Impact U.S. Residency
Depending on whether the taxpayers are permanent residents or visa holders who meet the substantial presence test, being tax and offshore compliant is important to maintain their status. If a taxpayer is under audit, for example, and the IRS learns that the taxpayer is out of compliance, and that the taxpayer is a resident and not a citizen, the IRS may refer the matter to USCIS (although this is generally limited to criminal situations).
Tax Liens and Levies May Impact Renewal
When it comes time for a resident to renew their U.S. person status, if the immigration department learns that the taxpayer has been assessed fines and penalties for failing to properly report their information about their foreign and offshore accounts and assets to the U.S. government, it can cause the resident problems.
Willful vs n Non-Willful; Civil vs. Criminal
It is also important to determine the type of violation to assess the seriousness and how it can impact residency status. In general, non-willful violations can be resolved and they should not impact any sort of residency status. Under most circumstances, even a willful violation will not directly impact residency status — unless the taxpayer committed some criminal acts that they are being investigated and possibly prosecuted for.
Late Filing Penalties May be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.