Knowing These 4 Choices About Ovdp Will Save Your Neck
And the IRS demands to know where all the citizens foreign accounts are located ---
it is a crime to keep these foreign bank account secret if they are over $10,000.00 in value. For those citizens in non-compliance, the IRS ran two offshore voluntary disclosure initiatives (OVDP). The last one passed on August 31, 2011. For those taxpayers thinking what to do, this piece talks about their 4 remaining options.
Option One: Do nothing. You could do nothing and hope that the Internal Revenue Service does not find out the account. Perhaps your foreign foreign bank account is at a bank that you believe to be "off the radar" or is in a quiet country, or under a friend's name, or opened with a non-US passport. Well, it used to be that a foreign bank account's actual owner could be kept anonymous. However, now, the IRS has vastly many more tools than it did previously to find secret accounts.
This is an important caveat. The chances are that the IRS does not discover previously unreported accounts gets smaller and smaller. Why? Because in order to compete for US 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 IRS will also run names of other individuals it suspects of being American 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. There is only way to escape the jurisdiction of the IRS taxing authority. That is, to renounce one's citizenship and no longer be a American citizen. The process is complicated. 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. Expatriation may make sense to avoid future tax liabilities , but you have to report the existence of undisclosed accounts first.
Option 3: Soft (or quiet) disclosure. One option is to file amended returns, this time including previously unreported income simply filing the returns as if it were simply forgotten income. Sounds think a good strategy, right? Perhaps one could avoid all those excessive penalties of the OVDP programs?
The Department of Justice states that it has begun prosecutions on people who have attempted soft disclosures. So this option has some serious problems
The "soft" disclosure option is incredibly risky for several reasons. One massive failing is that a soft disclosure does not remedy 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 filing a soft disclosure 't go far enough to eliminate any possibility of criminal charges. In fact, the amended return may --- well here's the problem with this option --- it does nothing concerning the failure to the FBAR. There are still criminal and civil investigations that may be pending for failing to file an FBAR, but simply give the IRS a very handy to find you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. If enjoying the rest of your life is chief concern, there can be no doubt that this 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 conditions of the 2011 OVDP which capped certain penalties.
There are 2 main requirements. First, the taxpayer cannot already be under examination or criminal investigation. And next, the foreign assets cannot be connected to any criminal activity think money laundering or drug trafficking. Once these qualifications are satisfied, criminal charges come off the table and the taxpayer's is sent to the civil division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a guarantee of absolutely no criminal charges. Although fines and penalties may be substantial, that's just a bill, they are meaningless compared to an .
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified Offshore tax attorneys, experienced in foreign compliance and delicate IRS negotiations.
by: car4xc31hu
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