Voluntary Disclosure

If you hold financial assets outside the United States, whether one foreign account or several, the Foreign Account Tax Compliance Act (FATCA) requires you to report them, and failing to do so can carry serious penalties. The IRS offers no formal amnesty, but its voluntary disclosure and streamlined filing options exist to help taxpayers who are behind on this reporting catch up and reduce that exposure. This page explains what people mean by FATCA amnesty, what must be reported, and what the penalties look like.

These programs are not only for people hiding money. Many taxpayers with new foreign accounts, or who recently moved to the United States, are simply unfamiliar with FATCA's reporting rules. An attorney can walk through your accounts, identify what is required, and explain the options before you file anything.

What the IRS options offer

The IRS's current options reduce the penalties otherwise assessed against taxpayers who failed to disclose foreign financial accounts. The Streamlined Filing Compliance Procedures serve taxpayers whose failure was not willful, and the Criminal Investigation Voluntary Disclosure Practice serves those whose conduct may have been willful. Both let taxpayers come forward with account information and reduce their penalties. These programs apply to individuals, businesses, and organizations, and submitting assets as part of FATCA compliance helps taxpayers reduce or avoid penalties tied to offshore and international accounts.

To remain in compliance, taxpayers must submit Form 8938 with their Form 1040 tax return. Form 8938 asks for basic details about each asset, including the name of the institution where it is held and the highest balance the account reached during the year. Failing to provide this information can trigger penalties on its own.

Which assets are reportable

Any asset a United States taxpayer holds abroad is reportable under FATCA. That includes bank accounts, investment accounts, life insurance, retirement accounts, and mutual funds. The rules reach U.S. citizens living anywhere in the world, green card holders, and tax residents who meet the substantial presence test, along with trusts and estates whose beneficiaries are United States residents.

The reporting threshold varies by marital and filing status, so confirming what applies to you is worth a conversation with an attorney. There are some exemptions: bank accounts held at United States institutions with foreign branches generally do not need to be reported, and social security received from a foreign government does not either. An attorney can confirm whether a specific asset must be disclosed.

Penalties for noncompliance

Failing to timely file or correct FATCA reporting carries real financial risk. The base penalty for a failure to file is $10,000, and taxpayers who continue to delay can face an additional penalty for each 30 day period the failure continues, adding up to $50,000 more in penalties.

Penalties can also turn on whether the noncompliance was willful or non-willful. If the IRS determines that a failure to file an FBAR, the separate report of foreign bank accounts, was willful, the penalty can reach half the account balance, or a six-figure amount when that is greater, and penalties can apply for multiple years. Reduced penalties under one of the IRS's disclosure options, and compliance with the IRS more broadly, also help you avoid potential criminal exposure.

How an attorney reduces your exposure

The first step is determining your willful status. Whether a failure to report resulted from negligence or was intentional makes a significant difference to how the IRS and other tax agencies treat your case, and an attorney can help you assess which applies before you make any filing.

From there, an attorney can walk you through filing delinquent forms and back tax returns under the voluntary disclosure process, so you meet your obligations without navigating FATCA on your own. This page sits within Whiteford's international tax practice, alongside related work on FATCA compliance and FBAR compliance.