You’ve probably read the media coverage about the recent agreements between the US government and foreign countries concerning Americans with offshore bank accounts.
If you’re following the unfolding details and are unfamiliar with the lingo, here’s a short glossary.
FBAR. The Foreign Bank Account Report, or Treasury Department Form 90-22.1, Report of Foreign Bank and Financial Accounts. You have an obligation to file an FBAR if you have taxable income from a foreign source, such as an offshore account.
John Doe Summons. A summons issued when the person under investigation is unknown and therefore not specifically identified. The IRS issued this type of summons to request information about taxpayers who were using foreign bank accounts to evade US federal income taxes.
Voluntary Disclosure. A program that allows you to confess to the IRS voluntarily if you have unreported income. The catch: You have to initiate voluntary disclosure before the IRS establishes contact with you.
Amnesty. A governmental act or pardon that typically offers reduced penalties designed to encourage you to come clean with past transgressions—such as failing to report all your income from a foreign bank account or other entity. The federal tax amnesty for undeclared offshore assets ends September 23, 2009.
Quiet Disclosure. When you file amended returns without first making a voluntary disclosure. Amended returns related to offshore accounts that were filed under quiet disclosure are currently being reviewed by the IRS.
Six Year Period. Generally, the statute of limitations for the assessment of tax, penalties and interest is three years. In the case of unreported offshore accounts or income, you must agree to a six year statute in order to qualify for a reduced penalty.