Failure to file returns and disclosures with the IRS on time can result in substantial penalties. This can include civil fines and, in some cases, criminal prosecution. The IRS has several ways for taxpayers to file documents or amend filings late without incurring the full penalty. The Voluntary Disclosure Program (VDP) allows taxpayers who could be subject to criminal penalties to bring themselves into compliance. The agency began offering VDP for offshore filing requirements in 2009. It discontinued that program in 2018, in favor of a single set of guidelines for domestic and offshore tax disclosures. Our Los Angeles tax advisors can help taxpayers understand these guidelines.
Overseas/Offshore Disclosure Requirements
Federal tax law requires taxpayers to report certain transactions with foreign businesses, holdings in foreign banks and financial accounts (FBARs), and other international financial matters. Penalties for failure to file required disclosure forms can be severe.
Form 5472, for example, is used to report information on domestic corporations with foreign ownership and foreign corporations doing business in the U.S., as required by, respectively, Internal Revenue Code (IRC) §§ 6038A and 6038C. Failure to file this form can lead to a $25,000 penalty for each deficient year.