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Offshore account compliance, part 1: identifying the alphabet soup

Individual tax filing season gets a lot of media attention. Historically, TV stations have run footage of taxpayers rushing to the post office in order to file. Even with more and more people filing online, filing day - usually on or around April 15 - remains etched in the popular consciousness.

There is, however, another filing deadline that is not so well known, yet of comparable importance to taxpayers in California and across the country. That date is June 30, when holders of foreign accounts worth more than $10,000 must report them to IRS. The reporting is done through a form called the FBAR. The abbreviation stands for Report of Foreign Bank and Financial Accounts (FBAR).

In recent years, the IRS has stepped up its enforcement on these offshore accounts. This has included several different versions of what has essentially been a limited amnesty program for those who failed to comply with the reporting requirement in the past.

This program is also known by an abbreviation: OVDI, for Offshore Voluntary Disclosure Initiative. We last discussed it in our October 10 post.

It should also be noted that Congress has recently taken action to enlist more assistance from foreign governments in cracking down on the use of offshore accounts for suspected tax evasion. That initiative is the Foreign Account Tax Compliance Act (FATCA). We discussed its main components in our November 2 post.

The upshot of this alphabet soup of offshore accounts - FBAR, OVDI, FATCA - is that the IRS is increasingly targeting holders of foreign accounts for stepped-up tax law enforcement.

In our next post, we will discuss a recent California case in which a Los Angeles businesswoman entered a guilty plea on charges of conspiracy to commit tax fraud.

Source: "Report of Foreign Bank and Financial Accounts (FBAR)," IRS.gov 

Please visit our page on offshore bank accounts.

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