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IRS Crackdown on Tax Evasion to Hit Duel Citizens Hard

August 24th

tax evasionThe new system being imposed by the IRS in an effort to get those with offshore accounts to disclose that income could, potentially, bring harsh financial penalties for many dual citizens. Many Americans holding dual citizenship may unknowingly be breaking the law.

Offshore Voluntary Disclosure Initiative

The IRS requires that all American citizens file tax returns, even those who live, work and pay taxes overseas. Often, in these cases, dual citizens do not realize that they are required to file in the United States as well as in their resident country.

This has become a particular issue of late, with the establishment of the Offshore Voluntary Disclosure Initiative. This program was designed to allow those who have hidden income in offshore accounts to file taxes voluntarily. Approved applicants have until August 31 to file in exchange for less severe penalties.

The establishment of the Offshore Voluntary Disclosure Initiative means that those who do not choose to file will be under greater scrutiny and could face substantial penalties in excess of those typically offered. Taxpayers not submitting to voluntary disclosure may risk the imposition of IRS penalties, such as the fraud penalty and foreign information return penalties, as well as an increased risk of criminal prosecution.

In fact, anyone convicted of criminal tax evasion could face a prison term of up to five years and a maximum fine of $250,000. This includes those who may not have even known they were committing an offense and simply had delinquent unpaid taxes.

Anyone with dual Canadian citizenship should be especially wary, since the chances of being caught will rise even further in 2013. At that point, a new law requiring Canadian banks to share client information with the United States government is planned to come into effect.

 

 
 
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