LOS ANGELES, April 18, 2016 (GLOBE NEWSWIRE) -- Dennis Brager, founder of the Brager Tax Law Group, warns offshore account holders that the Panama Papers, comprised of more than 11.5 million financial and legal records identifying secretive companies that may have evaded taxes, could be just the “tip of the iceberg.” The offices of Mossack Fonseca, the Panamanian law firm at the center of the controversy, was raided by Panamanian police on April 12. “I expect that further revelations will be forthcoming,” says Brager.
“Holders of offshore accounts can no longer assume they are secret; there are a number of agreements between governments to disclose account holder information that was formerly private,” states Brager. “The IRS will, undoubtedly, carefully examine the Panama Papers to find those who have evaded U.S. taxes.”
U.S. account holders are required to file an FBAR (Foreign Bank and Financial Accounts Report) form with the IRS and disclose the account. U.S. account holders also need to declare the foreign accounts on their tax return and report any income. Failure to fulfill these obligations can lead to severe penalties if the IRS unearths the non-compliance.
“If the IRS finds a name in the Panama Papers, for example, and opens a case,” continues Brager, “that person can face enormous fines and even jail time.” The civil penalty for knowingly failing to file an FBAR is the greater of $100,000 or 50 percent of the total foreign account balance. Each year of non-compliance can lead to separate and cumulative penalties.
“If you hold an undisclosed account, chances are that the IRS will find you sooner or later,” cautions Brager, a former Senior Tax Attorney with the IRS and a California State Bar Certified Tax Specialist. There are several options to help alleviate some of the high penalties and fines. One option is the Offshore Voluntary Disclosure Program (OVDP) where some taxpayers may be eligible for lesser penalties.
Another option is the Streamlined Filing Compliance Procedure for people who non-willfully failed to file an FBAR or report income from offshore accounts. They may qualify for a penalty of five percent of their highest account balance. Someone living outside the U.S. may not have to pay any penalty. “There are other alternatives, but once the IRS focuses on you, the options are substantially reduced,” according to Brager.
“Choosing the best alternative is complicated and fraught with pitfalls,” continues Brager. “If an account holder is unsure of the next step, I suggest the person files an extension to October 17th to consider all the options.” U.S. tax returns are due on April 18th this year, except Maine and Massachusetts where the deadline is April 19th. For those living outside U.S., the tax return filing date is June 15th. The FBAR must be filed by June 30th and there are no extensions.
If tax preparers know that there is an overseas account and do not include it on their client’s return, they could be liable for criminal penalties, their ability to practice before IRS could be revoked and they are subject to penalties for filing an incorrect return.
Based in Los Angeles with a worldwide client base, the Brager Tax Law Group is a tax litigation and tax controversy law firm, which represents clients worldwide with civil and criminal tax disputes with the IRS, the California Franchise Tax Board (FTB), the State Board of Equalization (SBE) and the Employment Development Department (EDD). All of the Brager Tax Law Group’s tax lawyers are former trial attorneys with the IRS.
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Source:Brager Tax Law Group