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).

As we head into 2023, taxpayers in New Jersey need to prioritize compliance. The IRS has made clear that it intends to ramp up its enforcement efforts in the years to come, and its Strategic Plan for Fiscal Years 2022-2026 highlights several enforcement priorities. With this in mind, here are some of our key insights from 2022 that taxpayers can (and should) carry into 2023.

When taxpayers pay the Internal Revenue Service (IRS) less than they owe, interest begins to accrue immediately. Underpayment interest is calculated as a percentage of the unpaid amount, and this percentage changes based on fluctuations in the federal short-term rate.