Filing US Taxes? If Not, the IRS has 5,100 Reasons to Start!
President Obama has proposed a $1.13 billion increase in the IRS budget for 2012. About $460 million of this is earmarked for tax enforcement programs such as those targeting Americans who live, work and invest abroad. This money would hire about 5,100 new agents who would, according to Treasury Department officials, increase collections from US taxes by about $1.3 billion annually.
“Combating international tax evasion is a top priority for the IRS. We have additional cases and banks under review. The situation will just get worse in the months ahead for those hiding assets and income offshore.”
– IRS Commissioner Doug Shulman.
The government’s increased focus on tax evasion is having a profound impact on Americans living abroad who still need to file US taxes. You don’t need to have a ton of money to fall on the IRS’s radar. At the moment, anyone who has had more than $50,000 is being researched. So, for example, if you live in the UK and have taken advantage of your ISA contributions for the past three to four years, that may make you a target.
This alone could total over $50k, and you would be a prime target for the IRS enforcement teams! Not to mention that ISAs are tax traps, so you may owe money on the interest and capital gains you earned as well as penalties!
Another case: Maybe you are saving to buy a house in Singapore. You transfer money from your US account to your Singapore account for the down payment. Your Singapore bank will report this to the IRS, and the IRS will come after you.
So, if you have not been keeping up with your US taxes, what does this mean for you?
Well, for starters, you had better get caught up with your US taxes sooner rather than later. There will be an additional 5,100 agents looking for you next year! It also means that you should get caught up TODAY! Until August 30th, 2011, the IRS is running a Voluntary Disclosure Program (see last week’s blog post for more details on this). This means you would face reduced penalties if you catch up on your taxes, pay any tax liability and disclose any foreign bank accounts you have. If you aren’t sure where to begin, contacting a company specializing in expat tax services is a good place to start.
This is the best time since the 2009 Voluntary Disclosure Program ended to come clean and get caught up. Why? Because the IRS has stated what the penalties will be so you know what to expect, AND you can avoid criminal prosecution. Penalties are only going to get more severe in the future.
“Tax secrecy continues to erode,” Shulman said. “We are not letting up on international tax issues, and more is in the works. For those hiding cash or assets offshore, the time to come in is now. The risk of being caught will only increase.”
In my opinion, the rules are getting more onerous for Americans living abroad, but it won’t get any better if you ignore them and don’t file your US taxes. There is a great opportunity to catch up on your US taxes now, but the window is going to close very soon. Best to get these 5,100 agents off your back now!
Need More Information About Expat Tax Services?
We have a helpful blog post that explains everything you need to know about extensions. If you have more questions about US taxes or want to learn more about our expat tax services, please contact us.