Offshore bank accounts and mishandling them—or failing to do anything—can get taxpayers in trouble. The key concept is “willful” conduct. Tax attorney Rob Wood comments on the subject in this report, which is based on his Forbes article “10 Signs Your Tax Missteps Are 'Willful' Triggering IRS Penalties Or Jail.”
Wood notes at the outset that “It’s hard for all of us to evaluate our own facts.” This can be especially true with foreign bank accounts, especially when Swiss banks are involved. There was often some mystery involved in using foreign banks.
Wood also suggests that it is hard for taxpayers to determine the willfulness—or not—of their conduct if they were following directives from parents or bank officials. “A lot of people today were led down the primrose path” by following the advice of others.
One thing the IRS looks at as a badge of willfulness is setting up trusts or corporations to hold accounts. Filing some forms but not others is another sign. So is reporting one account but not another. Using a non-American passport will raise red flags, whether you have a good reason or not.
Moving money around frequently and dealing in cash are things that will also attract the attention of the IRS. “Anything that looks secretive” will attract attention. Asking that bank account statements not be sent is not something a taxpayer would typically do as to a regular account, Wood says.
All of these things have become more important since June 2014 when the IRS came out with its Streamlined program for people in the U.S. to clean up their compliance as to foreign accounts. The IRS and tax practitioners are aware that the Streamlined program is a good deal for taxpayers with foreign accounts, but one requirement for participation is non-willful conduct. Mr. Wood’s article provides the complete list of warning signs.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.