For those with foreign bank accounts and worldwide income, there is concern that with the Foreign Accounting Tax Reporting Act, or FATCA in place, people will be reported to the IRS. Rob Wood, tax attorney in San Francisco, California with Wood, LLP says that FATCA has been in the news a lot with lots of discussion and even a move to repeal it. However, Wood doesn't feel it will be repealed, having just gone into effect in 2012. FATCA makes foreign banks report on Americans and so, It is bringing people out of the word work with understandable worry, if they've done what they need to do or if there's something they need to fix, Wood explains.
The IRS Amnesty Program is still in effect with the Offshore Voluntary Disclosure Program, or OVDP and the Streamlined Program. OVDP is considered the main program, as the Streamlined Program, while cheaper, is much more limited as it's only for people living outside the U.S. for the last three years. The OVDP remains the gold standard for fixing things, says Wood, because it's so formulaic. No matter how much out of compliance you are, the OVDP is a way of getting into compliance, Wood says, where you have to put eight years up and the penalty structure is very predictable. While it is not the only way to fix things, it is considered the preferred method and most secure in terms of worry level and guarantee of no prosecution.
Wood also warns that FBAR penalties are far worse than tax penalties and regardless, he advises people to do their own research with the many articles and information available on line and to most definitely get professional advice.
For more information on the article written in Forbes magazine about this, click here. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.