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IRS to waive penalties for some overseas accounts

Published on NewsOK Modified: June 18, 2014 at 6:30 pm •  Published: June 18, 2014

WASHINGTON (AP) — The Internal Revenue Service is offering to waive steep penalties for Americans living abroad who haven't been paying their U.S. taxes.

But there is a catch: You have to be able to show that you didn't evade U.S. taxes on purpose.

American citizens living abroad are required to file U.S. tax returns, even if they keep all their money overseas. Similarly, U.S. citizens living in the United States are required to tell the IRS about any accounts they have in foreign banks.

The penalties for not reporting these accounts are stiff. If there is more than $10,000 in an unreported account, the IRS can impose penalties of 100,000 — more if the accounts are really big.

The IRS announced a program Wednesday that would largely waive these penalties if taxpayers come forward and show that they didn't hide the money on purpose.

Americans living abroad can have all penalties waived, if they file three years' worth of tax returns and pay any back taxes.

Americans living in the U.S. can come clean by disclosing overseas accounts and paying a penalty equal to 5 percent of the account's assets.

For people who are willfully evading U.S. taxes, the IRS is tweaking an existing program that imposes stiff penalties for people who come forward, but allows them to escape criminal prosecution.

"Our aim is to get people to disclose their accounts, pay the tax they owe and get right with the government," IRS Commissioner John Koskinen said in a statement.

IRS officials declined to provide examples of how someone could inadvertently fail to report income or bank accounts.

Instead, they offered this definition: "Non-willful conduct is conduct that is due to negligence, inadvertence or mistake, or conduct that's the result of a good-faith misunderstanding of the requirements of the law."

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