International Cash and Assets (Part 2)
In recent years the IRS has been on a mission to identify and investigate US citizens hiding assets offshore. There have been countless news articles detailing international banks making settlements for helping US citizens avoid taxes. Recently the release of the Panama Papers and the Paradise Papers (Appleby) opened the world up to how the top 1% of the wealthy stash their assets offshore. At SRG Advisors, LLC I work with Joshua Goldstein, CPA, our Director of International Operations and our in-house expert for all global projects.
Here are two situations that we worked on in the last year alone.
Client A:
Client A’s mother passed away and left her with a sizable estate which included an international trust. The problem with the international assets was that it was never reported to the IRS, and income taxes were never paid throughout the years of ownership. The assets included artwork by famous artists, investments in foreign corporations, and cash and marketable securities. When the client’s mother passed, client A hired a team of advisors that informed them that they should enter the Offshore Voluntary Disclosure Program (OVDP). The OVDP is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. It’s a complex program that should be evaluated by a team of experts to see if it’s applicable to each client.
The OVDP program requires the taxpayer to correct eight years of tax returns. This is much more than the normal three year statute of limitations when normally amending returns. Most CPA’s do not even have the tax programs to do this type of work. In the end SRG Advisors prepared all the complex tax returns with the FBARs (Report of Foreign Bank and Financial Accounts) in record time to allow the client to enter the QVDP program.
Client B:
Clients B’s grandmother lived internationally and passed away almost a decade ago. The grandmother left him a sizable down payment for his future house in an international bank. The client decided to forget about it and figured he would use the money when it came time to buy his first house. Fast forward 8 years and client B met with his new financial advisor and disclosed this situation. The financial advisor immediately knew this was an issue and referred him my way. The client had a feeling that something needed to be done but decided to push it off each year. Now that he was putting a down payment on his first home he transferred the money to a US bank. With the transfer, the bank sent a letter informing him, in short, that per US guidelines they had informed the IRS about this account and the transfer into the USA.
Client B did not file the required international forms throughout the years of holding this bank account and did not report any of the income each year on his tax return. When I informed client B of the highest possible penalties (50% of the account balance) - he almost cried. This was the money his grandmother and his mother put away for him and he was saving it to start his family. Now it was possible it could all be taken away.
In addition to the potential penalties, the client knew there could be substantial legal and professional fees to clean this up. SRG Advisors, LLC worked with the client to enter the Streamlined Foreign Offshore Procedures (SFOP). This program is a highly cost-effective method of quickly getting clients into compliance before it is too late. However, just like the OVDP program referred to above, it is complex and entails many filing requirements and penalty payments. However, if done correctly, it could save clients thousands in penalties, fees, and the possibility of going to jail.
Using the Streamlined Foreign Offshore Procedures (SFOP) program SRG Advisors, LLC applied to get client B into compliance. While this is a lengthy process and has not been completed, the client is sleeping much better knowing that he has done everything in his power to rectify their situation and will not have to pay the 50% penalty.
Thoughts or questions? Feel free to comment or email me at or call me direct at 201-525-1222 Ext 212. Contact SRG Advisors, LLC today to have a highly trained and dedicated member of our team review your returns!!!