If you earn money overseas through work or investments, your tax game is a bit more complicated than it is for average Joes working stateside.
But that doesn’t mean your tax filings can’t be seamlessly done with the help of a tax professional. Tax professionals are in a prime position to know the tax game and issues for overseas income and assets. And, as the laws and required forms keep changing, tax professionals are up to date with all the developments.
There are a variety of IRS forms and programs when it comes to reporting overseas earnings. There’s also different deadlines and filings periods to know.
Here’s some key information on the more important overseas filing programs.
The Offshore Voluntary Disclosure Program is viewed as the IRS’s main overseas tax reporting program.
Taking part in OVDP isn’t the most convenient path to take: you’ll have to file eight years of amended tax returns. The penalties will run at 20 percent of what you’re calculated to owe, and 27.5 percent of the highest balance of your offshore accounts.
The penalties and paperwork may seem steep, but going through all that helps avoid criminal prosecution and, potentially, time in jail. OVDP is probably a smart move to make with the help of a tax professional.
The other main IRS overseas asset reporting program is known as the Foreign Bank Account Report, also known as FBAR.
FBARs are due every year by June 30. They’re required if you have an interest in a minimum of $10,000.00 throughout all of your overseas financial accounts. If your international accounts don’t add up to at least $10,000.00, you’re off the hook with the FBAR filing, but you still have to report any money the accounts earned you.
The IRS takes FBAR requirements seriously. Civil penalties range from $10,000.00 for unintentional non-reporting, but intentionally failing to file a FBAR can cost you upwards of $100,000 in penalties.
Another IRS program for disclosing offshore accounts is the Streamlined program. There’s one for Americans living abroad and another for those living stateside.
Streamlined programs require a bit of work, namely, showing that you made unintentional mistakes. They don’t offer protection from criminal prosecution, and they’re a little more stringent with their requirements compared to the OVDP.
Penalty wise, it runs at a mere five percent for the domestic program, and it’s calculated with lower base figures.
It’s better to work with a tax attorney or tax professional to cover your bases when it comes to your overseas finances. Making money across the pond or a couple continents away is a good thing, but with extra riches comes a little bit of extra IRS paperwork.
You might have an offshore account to make business easier abroad, qualify as an expatriate, need it for better business, or possess one for other legitimate reasons. However, there are still rules to follow to comply with IRS regulations and..Read More