For many years now, offshore tax compliance has been a focus of the US government and the Internal Revenue Service. Very soon the IRS will have the opportunity to pursue offshore enforcement much more aggressively than they have in recent years. This is due to their new funding which has allowed them to significantly increase their workforce and expand their reach. From an offshore compliance perspective, these are some key points to look at for 2023:

FBAR Filing

FBAR filing is at the heart of offshore tax compliance. Over the years the IRS has increased their ability to crack down on non-compliance with their ever-expanding list of “bad” offshore banks which trigger a draconian 50% penalty for taxpayer customers. In the case of taxpayers who are delinquent with their FBAR filings, but non-willful, there is an important Supreme Court case which will have massive implications for people facing non-willful FBAR penalties. The decision will also affect people who have paid the non-willful penalty in the past. The decision will determine if the non-willful penalty will be limited to $10,000.00 per FBAR filing (which amounts to $10K per year) or $10,000.00 per account, which is unlimited and will obviously have a profound effect on people with various offshore accounts.

Offshore Cryptocurrency Reporting

Cryptocurrency is still a relatively new concept and the rules for reporting it are very much still developing. However, it is critical to report these transactions to avoid penalties. The US Government seeks to require taxpayers to report their offshore crypto on forms such as the FBAR.

Taxpayers Living Abroad

Taxpayers living overseas are being targeted by the IRS. The general belief by the government is that these people are not reporting their foreign bank accounts. As with any taxpayer, but particularly those living overseas, if they are out of compliance, they would be best served to become compliant before the IRS identifies them. With the new funding and the larger personnel, the IRS is now more likely than ever to track down non-compliant taxpayers. If you are non-compliant, you should seriously consider speaking with a Board Certified Tax Law Expert who specializes exclusively in these types of offshore disclosure matters.