Knowing These 4 Choices About Offshore Voluntary Disclosure Initiative Will Save Your Neck

If you are an American taxpayer with an offshore accounts that you thought were secret

, you must bring it into compliance that is file missing FBARs and include any missing income on amended tax returns. With the off-the-shelf deals previously offered, the terms of the settlement were known and predictable. Now that the 2009 and 2011 offshore voluntary disclosure initiatives (OVDI) have ended, the Internal Revenue Service has not yet issued a new OVDI, so many non-compliant people are wondering if they should come forward and what the cost of coming forward will be. These are the four options still available.

The first option is to do nothing except hope and pray. The advantage is that it costs zero to do, and there is certainly a likelihood of greater than zero, no matter how minor, that the taxpayer can get away with the crime. The downside that is if caught, there is an extraordinary 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 undisclosed accounts gets smaller and smaller. Why? Because in order to compete for US customer and capital, foreign banks are coerced into complying with the Internal Revenue Service. 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 US holders of foreign accounts, the IRS will get that information. The IRS will also run names of other individuals it suspects of being US citizens but who opened their accounts with foreign passports. The IRS has more power and intelligence that it ever had before. The Internal Revenue Service has the manpower and field agents in every major city around the globe.

Option 2: Renounce citizenship; Leave the country. There is only way to escape the jurisdiction of the Internal Revenue Service taxing authority. That is, to renounce one's citizenship and no longer be a American citizen. The process is not as easy as you may think. Also, a requirement of proper 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 hidden accounts first.

The third option is to simply file amended returns and not explicitedly tell the Internal Revenue Service that you are seeking to voluntarily disclose. 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 Internal Revenue Service a roadmap to charge you criminally, and if you are caught, you are see high penalties and a nasty and real possibility of criminal charges.

There may be serious problems with this alternative. One major drawback is that the Department of Justice states that it has begun criminal proceeding against people who attempted to utilize the "soft" disclosure process.

The "soft" disclosure option is incredibly risky for several reasons. One reason is that a soft disclosure does not address the problem 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. As a result simply filing a soft disclosure 't go far enough to eradicate any likelihood of criminal charges. In fact, the amended return might --- well here's the problem with this option --- the soft disclosure does nothing about the failure to FBAR forms. There are still criminal and civil investigations that may be pending for failing to file an FBAR, but simply give the Internal revenue service a roadmap to locate you.

The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. This is the best option. Even though the time to file under the 2011 OVDI has passed, there is time to act. The only thing that passed on August 31, 2011 was the specific standards terms of the 2011 disclosure. It was simply a pre-agreed upon penalty arrangement. The Internal revenue service always welcomes voluntary disclosures.

There are two main requirements. First, the taxpayer can't already be under examination or investigation. And next, the foreign accounts can't be connected to criminal activity like money laundering or drug trafficking. Once these qualifications are satisfied, 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 guarantee of absolutely no criminal charges. Although fines and penalties may be substantial, they are insignificant compared to an .

If someone is still wondering what the suitable course of action is, it is imperative that they only talk to a qualified foreign tax attorney. The attorney-client privilege only applies when speaking to an lawyer. The Internal Revenue Service can subpoena a CPA or nearly anyone else to give evidence against a taxpayer.

by: ken04d91gr

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