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Does Missing compliance forms. must comply with this law. There are
two parts to reporting foreign account. Accounts include,
Foreign Compliance Bank Account, stocks, mutual fund, LIC policies, Provident
Fund etc. First, when your foreign accounts are is giving
take you to Jail? you income, dividend etc. that needs to disclose this in
your tax return as foreign income. This does not mean
your double taxed because you can also get allowable
foreign tax credits. Although tax due could be zero or
negligible, not showing the amount in tax return could
mean you are concealing foreign income to IRS. Second,
when you are maintaining foreign bank accounts outside
US and your aggregate daily balance between those
accounts exceeded $10,000 even in single day then you
would have to file Foreign Bank Account Reporting (FBAR)
form. This applies to each taxpayer in the household.
When your balance exceeds $75,000 for single tax filer
and $150,000 for Married joint filers, then additional form
called FATCA must be filed. Penalties are different for each
form for non-filing. If you have foreign salary form 2555
needs to be filed. If you have foreign trust, Form 3520
needs to be filed. U.S. citizen, corporation, partnership,
trust, or estate who has at least 10% ownership in a foreign
corporation, needs to file Form 5471. If you have made
foreign capital contribution, then 5472 needs to be filed.
There are many other IRS forms that is required on different
In April 2011, 46-year-old Vaibhav Dahake, American situations. Our firm is currently providing free consulting so
Indian of New Jersey was sentenced 5-year prison for that everyone can make an educated decision to comply
willfully concealing his foreign bank accounts in India. U. before penalties pile up. Many of my clients are scared to
S tax authorities has prosecuted many other people after open foreign accounts. As long as you are reporting these
that for tax evasion in this crackdown including taxpayers, accounts to IRS, there is nothing to worry about because
bankers, lawyers, and advisors. In October 2017, 50-year- they are only for reporting purpose. IRS just wants to make
old Michael Fitzgerald of Longmeadow, Massachusetts was sure that you are not money laundering or opening foreign
sentenced 6 months of prison and fined $1,115,320. Upon bank to evade U.S. taxes.
release, Fitzgerald would be monitored and supervised for Vaibhav Dahake later received a bail for his jail time
4 years. with $250,000 civil fine and had to pay his new tax dues
The big question is, does everyone who miss foreign immediately. Prosecutors left him with the condition that
compliance goes to jail? Answer is clearly, “No”. Best he would provide the government officials useful internal
way to break this down offense is willful and non-willful information that would eventually help the government
violation. When someone misses filing foreign compliance to find other individuals with similar offense. Foreign
unknowingly, this is non-willful violation. When someone compliance audit has been very aggressive since 2010.
makes a scheme or strategy to undisclosed foreign I have been personally advising my clients on foreign
accounts to IRS simply to avoid taxation, this is willful compliance for years. While we can achieve the lowest
violation. Separating willful versus non willful could be penalty possible through our many years of expertise, I
tricky and complex. There are so many forms involved and prepare my client with both best and worst scenario while
understanding it all could be cumbersome. I would advise disclosing offshore assets.
everyone to seek advice from foreign tax expert to seek help
to comply with this law. There are subsidized IRS programs Diwas Dhungel
where taxpayers can comply with minimum possible fine. Senior Director of Operations
Although I cannot cover everything in this small article, Perfect Tax & Finance
I would like to leave everyone with basic knowledge so April 21, 2021
that everyone knows who is required should file foreign

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