Irs And Offshore Accounts Do You Know Your Options
The IRS has power to tax income from around the globe
. The Internal Revenue Service has universal jurisdiction to tax income anywhere it is earned --- even it was earned on the moon! Not only that, it is a crime not to tell the IRS about foreign accounts if their value exceeds $10,000.00 by filing an FBAR form every June. The IRS offered two previous offshore voluntary disclosure initiatives. One in 2009 and the last one in 2011. The last one expired on August 31, 2011. For those taxpayers wondering what to do, this article talks about their four remaining options.
The first option available is to roll the dice and pray for a miracle. The advantage is that it costs zero to do, and there is certainly a possibility, no matter how slight, that the taxpayer can get away with the crime. The downside that is if caught, there is an incredible emotional strain for anyone who become a criminal defendant. Even if acquitted, the entire process will be the most arduous time of someone's life. Even if found not guilty, a criminal trial is still incredibly costly.
This is an fundamental disadvantage. The chances are that the IRS does not discover previously unreported accounts gets more and more remote. Why? Because in order to compete for American customer and capital, foreign banks are coerced into complying with the IRS. That's right --- foreign banks take their marking orders from the Internal Revenue Service as well. So if the Internal Revenue Service wants information on American holders of foreign accounts, the IRS will get that information. The Internal Revenue Service will also run names of other individuals it suspects of being US citizens but who opened their accounts with foreign passports. The Internal Revenue Service has incredible investigative powers --- powers it never had before.
Option 2: Renounce citizenship; Leave the country. Do you want to say goodbye to the Internal Revenue Service? There is only one way to do it. That is, to renounce one's citizenship and no longer be a American citizen. The process is complicated. Also, a requirement of recognizable expatriation is that a citizen has to be in compliance with all tax laws and pay an expatriation tax in order to make it official. If you fail to expatriate properly, you would still be subject to the jurisdiction of the American, meaning nothing was accomplished and you are still subject to all the requirements of the tax code. Renouncing your citizenship only gets rid of future tax liabilities, but you have to report the existence of previously unreported financial accounts first.
The third option is to simply file amended returns and not mention to the Internal Revenue Service that you are seeking to come clean. This is known as a "quiet" or "soft" disclosure. This is basically a "cheap" alternative and that's is only advantage . But the disadvantages are that you may give the IRS a roadmap to charge you criminally, and if caught, you are see high penalties and a nasty and real possibility of criminal charges.
The IRS says that these amended returns are "red flags." Even though the tax returns are amended and back taxes paid, the Internal revenue service tells says that foreign account holders will still face penalties and criminal charges. In addition to charging and prosecuting people with undeclared foreign income, the Department of Justice claims that it has also begun prosecution of citizens whose "Quiet Disclosures" were discovered by the Internal revenue service.
There are other problems with "Quiet Disclosures." One reason is that they do not remedy the issue of the taxpayer's failure to report the bank account on the FBAR; as a willful failure to file an FBAR is a criminal charge. So simply filing a quiet disclosure does not go far enough to eliminate any possibility of criminal charges. In fact, the 1040X might --- well here's the massive problem with this option --- the quiet disclosure does nothing concerning the failure to the FBAR. There are still criminal and civil charges that may be pending for failing to file an FBAR, but simply give the IRS a roadmap to find you.
Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") If enjoying the rest of your life is chief concern, there can be no question that this alternative is the best option. Yes, the 2011 initiative expired, but that does not mean a voluntary disclosure can not be filed. The IRS always welcomes offshore disclosures. The only thing that expired was the particular terms of the 2011 OVDI which capped certain penalties.
There are two main requirements. First, the taxpayer can't already be under audit or criminal investigation. And next, the foreign financial accounts can't be connected to criminal activity like money laundering or drug trafficking. Once these qualifications are met, any criminal indictments are removed from the continuum of possibilities and the case is sent to the civil division for assessment of taxes, interest and penalties. A successful OVDI offers reduced penalties and a promise of no criminal prosecution. Although fines and penalties may be considerable, that's just a bill, they are meaningless compared to an .
If someone is still questioning what the suitable course of action is, it is critical that they only talk to a experienced overseas tax law firm. The attorney-client privilege only applies in communications to an attorney. The Internal Revenue Service can subpoena nearly anyone else to give evidence against a taxpayer.
by: dar3u75fpa
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