In the May issue of The Tax Adviser, Jim Standard published an article discussing how taxpayers who are holding investments in foreign financial assets or with foreign financial institutions can come into compliance with their reporting obligations.
“On occasion, taxpayers holding investments in foreign financial assets or with foreign financial institutions may find themselves in the uncomfortable position of realizing that they have failed to report their holdings on their federal income tax returns or have otherwise failed to report these holdings in accordance with federal law,” said Standard.
The article provides insight on general reporting obligations, penalties associated with the failure to file timely or accurate returns, the reasonable-cause defense, penalties associated with the failure to file FBARs, voluntary disclosure practice, streamlined filing compliance procedures, and delinquent information return and FBAR submission procedures.
“A taxpayer's realization that he or she has failed to timely file federal income tax information returns or FBARs can be distressing. Significant financial penalties, and perhaps even criminal penalties, may be imposed. Choosing the best pathway to come into compliance with these reporting obligations can be a daunting task. Under certain circumstances, relief may be available under a treaty or IRS pronouncement. Care should be taken to consult with a qualified tax adviser to analyze options and mitigate exposure,” Standard concluded.