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www.privateairny.com Private Air New York | Fall 2018 36 WHAT TO DO IF YOU HAVE UNREPORTED OFFSHORE ACCOUNTS The IRS has never offered a tax amnesty for U.S. taxpayers with delinquent tax or reporting obligations. However, it does offer several options for you to become compliant and not face the heaviest civil – and possibly criminal – penalties. Don't try to deal directly with the IRS for any of these options – hire an international tax professional to help you. If you have unreported offshore income, your best bet is likely the Offshore Voluntary Disclosure Program (OVDP). The OVDP exists for those who willfully failed to disclose offshore accounts (or are unable to prove non-willful conduct) and face potential civil or criminal penalties if discovered. But you'll need to pay a 27.5% fine based on the highest value of your total offshore accounts over the last eight years. However, this program ends September 28, 2018 (irs.gov/ individuals/international-taxpayers/ offshore-voluntary-disclosure-program). There are three additional alternatives to consider: Streamlined Filing Compliance Procedures. If you can prove your failure to both file offshore reporting forms and pay tax with respect to those assets was not willful, you may qualify for this option. If you lived outside the U.S. during this three-year period, there are no penalties. U.S. residents must pay a penalty of 5% of the highest aggregate balance of the taxpayer's non-U.S. accounts for the three preceding years. Delinquent FBAR Submission Procedures. If you failed to file Form 114 for one or more years, have no unreported offshore income, and can demonstrate your failure to do so wasn't willful, you may qualify for this option. There's no penalty if you qualify (irs.gov/Individuals/ International-Taxpayers/Delinquent- FBAR-Submission-Procedures). Delinquent International Information Return Submission Procedures. If you can demonstrate "reasonable cause" for failing to file one or more information returns, you may be eligible for this program. No penalties are imposed if you qualify (irs.gov/individuals/international- taxpayers/delinquent-international- information-return-submission- procedures). For more than three decades, Mark Nestmann has helped 15,000+ customers and clients successfully protect their assets and financial privacy overseas. His work has been featured in notable media including The Washington Post, The New York Times, ABC News, Barron's, and Forbes. To learn more, please visit www.nestmann.com or call +1 (602) 688-7552. How high? e minimum filing threshold for Form 8938 is $50,000. However, for expats, the filing thresholds are higher if you qualify for the Foreign Earned Income Exclusion. In fact, you may not even need to pay any U.S. federal tax. at's something worth researching. Otherwise, any non-U.S. asset you hold for investment that could produce taxable income, (or gains, losses, deductions, credits, gross proceeds, or distributions) is considered a "specified foreign financial asset" and must be reported. Even if you don't have any taxable gains or losses from those assets, you still must report them. is could apply to you, even if you don't realize it. For example, a frequently overlooked obligation for Form 8938 is an interest in a foreign pension plan, even if it's government-sponsored. So, maybe you don't hold more than $50,000 in overseas bank accounts, and you don't have any investment assets that you draw an income from. ere's still one more question to answer. Do you own 80% or more of a domestic corporation or partnership? If the answer is yes, then it's back to the reporting forms. You may need to file a Form 8938 if that corporation holds more than $50,000 in specified foreign financial assets. If at least 50% of the entity's total income stream is passive, you need to report it. Likewise, if 50% or more of its assets produce passive income. If those assets are held in order to produce passive income, you must report. Similar rules apply to domestic trusts with $50,000 or more in such assets. Penalties for failing to file Form 8938 start at $10,000. ey can be as much as $50,000 if the failure continues after you've been notified by the IRS. One bright note is that no criminal penalties apply beyond those associated with failing to file a tax return. As you can see, the reporting rules are complex and overlapping. But there's no reason for alarm. You simply need a professional on your side. Since seemingly simple international investments can give rise to complex reporting requirements, an experienced international tax expert should review your filings. It's their job to help you understand what you need to report. Mark Nestmann is president of e Nestmann Group, Ltd., an international wealth preservation and asset protection consultancy (nestmann.com) WEALTH MANAGEMENT

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