United States taxpayers are allowed to have accounts overseas. Offshore accounts are not illegal. What is illegal — failing to report these assets. The Internal Revenue Service (IRS) frowns upon attempts to keep these assets hidden. The failure to properly report these assets can result in more than just financial penalties and a slap on the wrist, they can lead to prison time.

The IRS and United States Treasury Department have taken steps in the past to better ensure taxpayers with foreign accounts comply with reporting obligations. The IRS has recently revamped its offshore voluntary disclosure program (OVDP) in an effort to further hold taxpayers who either forget or actively choose not to report these assets. The new move, called a campaign by the agency, involves the IRS sending out letters to previous OVDP participants. These letters outline the need for continued compliance.

Why the new campaign? According to a recent report, the agency has become aware of certain taxpayers who were required to file foreign information returns as a part of their OVDP agreement, but have yet to do so.

It is important to note that there are valid reasons for failing to file these information returns. The IRS itself recognizes the existence of these exceptions. One example: repatriation of the assets. Taxpayers who find themselves in this situation are wise to seek legal counsel to discuss whether or not their circumstances qualify for an exception. If not, they can also discuss options for compliance. The attorneys at Goldburd McCone are familiar with these and other international tax matters.