If you are a New Jersey resident but you spend time working abroad, it is important to make sure you have a clear understanding of your obligations to the Internal Revenue Service (IRS). While U.S. citizens working abroad can exclude foreign-earned income from their taxable income in some circumstances, reporting and payment violations are common—and these violations can trigger IRS audits and steep penalties.

Now that tax season is here, the Internal Revenue Service (IRS) is issuing several reminders for taxpayers. Errors and omissions on taxpayers' returns can lead to substantial penalties, and if an IRS audit uncovers evidence suggesting that a taxpayer has intentionally underreported or underpaid its federal tax obligations, this can lead to criminal prosecution in some cases. As a result, all taxpayers need to prioritize reporting compliance in 2023—starting with the basics.

The rules for FBAR and FATCA compliance are remaining unchanged for 2023. This means that U.S. taxpayers who own offshore accounts must assess their filing obligations as they have in years past, and they must file an FBAR, IRS Form 8938 or both if the aggregate value of their offshore accounts exceeds the relevant disclosure threshold(s).

While the employee retention credit established under the CARES Act (and extended under the Taxpayer Certainty and Disaster Tax Relief Act) provided much-needed financial relief for many businesses seeking to keep their employees on staff during the pandemic, businesses that claimed the credit are also at risk for facing IRS scrutiny. Combating COVID-19 relief fraud has become a top federal law enforcement priority, and this includes targeting businesses suspected of improperly claiming credits and other tax benefits.

Each year, the Internal Revenue Service (IRS) publishes a list of its “Dirty Dozen” tax scams. While the list primarily highlights scams that target taxpayers, it also includes tax scams that top the IRS’ list of enforcement priorities. In 2022, the IRS published its “Dirty Dozen” list in a series of articles, and the last article in the series makes clear that the IRS is prioritizing offshore account and digital asset reporting compliance in 2022. Learn more from New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group: