Uncle Sam, the posterchild for the U.S. government and its agencies, brings visions of a strong and demanding force. The Internal Revenue Service (IRS) projects much the same image. This federal agency expects all taxpayers — individuals and businesses alike — to meet all reporting requirements and file their tax forms honestly.
Not every country has these same expectations. This can lead to questions when individuals look to come to the United States from another country or when businesses have global operations.
In some areas throughout the world, it is traditional custom not to report all business income to local authorities. This is standard practice. In India, for example, businesses refer to such income as “black” and “white” money. This can lead the business to only report 50% of its income. As a result, business owners and individuals may rightfully be worried that turning around and reporting the full 100% in the United States could trigger questions from the other country where they only reported 50% of their assets.
These differences can cause confusion and further support the question — how much should the business owner or individual report? Should they report the same assets to the IRS that they did to another country?
There are no such cultural differences in the eyes of the IRS. The IRS expects full reporting. What this means for each individual or business will vary depending on their situation but can include the need to file multiple forms with multiple agencies. A failure to due so truthfully, to meet the IRS’ expectations, can come with serious penalties. In addition to restitution payments to pay the tax that is due, the business owner or individual could also face interest fees, additional financial penalties and even the potential for imprisonment.
Business owners and individuals are wise to take these penalties into account when looking to file taxes with the IRS. Bringing unreported assets to the United States generally involves a complicated scheme that likely includes use of money laundering. Money laundering is a serious crime that would increase the penalties noted above. It is also in the individual or business’ best interest to have a legal professional review all options to better ensure understanding of the potential risks and benefits in each situation before making a decision.