What Do U.S. Taxpayers Need to Know About International IRS Tax Audits?

The Internal Revenue Service (IRS) enforces taxpayers’ obligations whether they live in the United States or abroad and whether they incur their federal income tax obligations in the U.S. or overseas. As a result, regardless of where you live, and regardless of where you hold your assets or earn your income, if you underreport or underpay your U.S. income tax there is a good chance that you will eventually be audited by the IRS.

Facing an international IRS tax audit is a serious matter. The process and terminology are confusing, the laws and regulations are complex, and the consequences can be significant. Here are four important facts about international IRS tax audits from US International Tax Advisors:

1. U.S. Taxpayers have an Obligation to Report All Foreign Income and Assets to the IRS

As a U.S. taxpayer, you are obligated by federal law to report your foreign income to the IRS. You are also required to annually disclose your offshore bank accounts and other foreign assets. In addition to the relevant income tax forms, this typically means filing:

• Form 8939 – Statement of Foreign Assets
• FBAR – Foreign Bank Account Reporting Form

Depending on the types of offshore assets you own, you could potentially have other filing obligations as well. If you have not fully complied with the federal reporting requirements for foreign income and assets, you could be at risk during an international IRS tax audit.

2. The IRS has Agents Devoted to Combatting International Tax Fraud

Due to the complexity of the U.S. tax laws and regulations that apply to offshore income and assets, and due to the pervasiveness of international tax fraud by U.S. taxpayers, the IRS devotes substantial resources to this area. In 2018, the IRS launched its International Tax Enforcement Group, which is focused on identifying and assisting in the prosecution of cross-border tax offenses.

3. The IRS Works with Foreign Revenue Agencies to Combat International Tax Fraud

In order to combat international tax fraud on a global scale, the IRS also works with foreign revenue agencies to target offshore tax avoidance schemes and other crimes. The Joint Chiefs of Global Tax Enforcement (J5) is a coalition of agents and attorneys from the U.S. Australia, Canada, Netherlands and United Kingdom who work together to target international tax offenders.

4. International IRS Tax Audits Require a Strategic and Targeted Defense

If you are being audited in relation to your foreign income, offshore bank accounts or other foreign assets, you will need to execute a strategic and targeted defense in order to avoid unnecessary liability. This means understanding the specific allegations against you, understanding whether you have fully complied with federal law, and hiring an experienced Maryland international tax attorney to deal with the IRS on your behalf.

Request a Confidential Consultation with US International Tax Advisors

If you need legal representation for an international IRS tax audit in Maryland, we encourage you to promptly schedule a confidential consultation at US International Tax Advisors. To discuss your audit with US International Tax Advisors, call 844-796-8565 or contact us confidentially now.