For Americans living in Australia, the countdown has begun to take advantage of a US Internal Revenue Service program that offers partial amnesty for those who have neglected to file taxes stateside.
Last month, the IRS announced that it will begin to wind down the 2014 Offshore Voluntary Disclosure Program, which allows for US taxpayers with assets out of the country to avoid criminal prosecution for not reporting foreign accounts.
With the program concluding on September 28, affected individuals in Australia should examine their assets to ensure they are compliant with US tax requirements.
Tax attorney Shannon Retzke Smith, a partner at the international law firm Withers Bergman, spoke to Business Insider about the key takeaways for Americans living abroad when considering whether to take advantage of the program before it concludes.
Here’s what she has to say.
Which individuals in Australia are most at risk for having run afoul of US tax law?
“The individuals who are most risk are US citizens and US green card holders currently living in Australia. Also, Australian parents who have children in the US to whom they have made gifts are at risk,” she says.
What considerations exist for those individuals if they wish to take advantage of the voluntary disclosure program before it expires?
“The first consideration for individuals looking to take advantage of the voluntary disclosure program before it expires is timing,” Smith says.
“The person must come forward before the IRS identifies them.
“With bank informational exchange and the intergovernmental agreement, it becomes a ‘when will they find me’ not an ‘if they find me’ – the world has changed.
“The second consideration for taking advantage of the program is that there are options.
“Right now, people who have neglected to file taxes in the US still have choices.
“Many people living in Australia who simply made a mistake can take advantage of the existing programs and pay as little as no penalty – if they come forward now.
“If they wait, both the no penalty option and the option that provides criminal clearance become foreclosed to them.”
What type of foreign accounts, assets or inheritances should be examined when checking for compliance?
“When examining accounts and assets for compliance, there is a very broad range that could apply. This includes any type of bank account (investment accounts, savings accounts, checking accounts – even if they are non-interest bearing), retirement accounts (particularly Superannuation funds), life insurance, annuities, and any other account over which they have signature authority (like a power of attorney over an ageing parent or a child).”
What potential consequences could be faced by US expats in Australia who are not compliant once the program concludes?
“The consequences that could be faced for US expats in Australia who are not compliant include criminal penalties (jail plus significant monetary fines) and civil penalties far exceeding the assets,” she says.
For information for about financial planning for American expats living in Australia please visit our Whole Wealth Expatriate Page.
This article was published and provided by businessinsider.com.au