If you still have issues with unreported foreign transactions and accounts, you don't need a wake-up call. You need to be hit on the head with a two by four. The announcement that the IRS is closing its OVDP (Offshore Voluntary Disclosure Program) program on September 28th might have been your wake-up call, but you might have had plans to spend the summer in Luxembourg visiting your money, so you are putting it off until after Labor Day. Don't do it. There are many thousands of people who can knock out a reasonably OK tax return for you, but not that many who can help you navigate OVDP and they are going to be having a pretty busy summer.
Who Needs To Worry?
There are three broad classes of people who need relief from failure to comply with reporting requirements on foreign income and assets. There are the scoundrels who used secret off-shore accounts to avoid taxes and stiff creditors. There are people who violated disclosure requirements and avoided paying income taxes, that they didn't realize they owed. And there are people who failed in disclosure, but didn't get away with anything as a result.
The simplest disclosure requirement is the FBAR, which is required if you had ownership or signature authority over foreign accounts aggregating over $10,ooo. The FBAR is filed electronically with the treasury not the IRS. As foreign disclosures go it is not so bad, but it can be bit of a chore as you can see from the instructions. The penalties for not filing are very nasty.
Then there are the forms that have to be filed with the IRS. Form 3520 - Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Form 8938- Statement of Specified Foreign Financial Assets. Form 3520 - Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Form 5471 - Information Return of US Persons With Respect To Certain Foreign Corporations. Form 8621 - Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. Form 8865 - Return of US Persons With Respect to Certain Foreign Partnerships.
You know it is June, so your tax preparer has recovered from the April deadline and is not yet feeling the hot breath of September and October on his or her neck. Put in a call and ask which of those forms they have filed. Or to make it a little less challenging which ones they have heard of. Form 5471 is one that I have actually done. It borders on the impossible when you throw in trying to get the information you need, which might not be in English and will definitely be in a different currency with the rules for translating the currency almost as hard as the language problem.
The thing that is important in this area is that you are not willful in the things that you have missed. As Ms. Smith explained it to me that can mean that you told your tax preparer about the circumstances that might have required the filing. If it didn't occur to you to volunteer the information and the preparer did not think to ask, you might still be willful in the eyes of the IRS. Using the Streamlined Filing Compliance Procedures which will continue hinges on you not being willful and from what Ms.Smith tells me the judgement of the IRS in that area tends to be pretty subjective.
So if you are thinking about cleaning up your foreign compliance act, you don't want to let the chance for OVDP to slip away, because unlike Streamlined Compliance, which is a better financial deal, OVDP forecloses the possibility of criminal prosecution.