Offshore Accounts The Four Choices You Do Have
And the Internal Revenue Service demands to know where all the taxpayers foreign
accounts are located --- it is a crime to keep these 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 (OVDI). The last one passed on August 31, 2011. For those people thinking what to do, this piece talks about their four remaining options.
The first option available is to roll the dice and pray for a miracle. The benefit is that it costs nothing 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 disadvantages are that if discovered, the penalties are harsh. In both financial cost and in emotional drain of being charged with a federal crime. Even if found not guilty, a criminal trial is still incredibly costly.
Here's the thing despite what you hear, the US is still by far the largest ecomony in the world and has the richest population by far. Every foreign bank must compete for US customers. And in order to do so, these banks must comply with what the Internal Revenue Service tell them to. In order to be on the good side of the Internal revenue service is to disclose what the Internal Revenue Service says to cough up. So the bank is really at the mercy of the Internal Revenue Service.meaning so are the banks' foreign account holders. So you see, hiding behind the shadows becomes riskier and riskier. And once the IRS starts an investigation, there are no option left exceptpay outrageous taxes and the highest penalties and face the significant possibility of real jail time.
The second option is to renounce nationality and depart the country --- as this is the only way to escape the taxing jurisdiction of the IRS. But be warned --- this only will dodge future tax debts and compliance issues. The lone technique to correctly forsake is to effectively come clean about all overseas foreign bank financial records and actually forfeit an expatriation tax (in many ways it was easier to leave Soviet Block country than to leave the USA completely intact with your wealth.)
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 like a good strategy, right? Perhaps one could avoid all those excessive penalties of the OVDI 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
There are other problems with "Quiet Disclosures." One massive failing is that a soft disclosure does not remedy the problem of the taxpayer's non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. As a result simply filing a soft disclosure does not go far enough to eliminate any likelihood of criminal investigations. In fact, the 1040X might --- well here's the terrific dilemma with this alternative --- the quiet disclosure does nothing about 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 very handy to locate you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. This is the optimal solution. Even though the time to file under the 2011 OVDI has expired, there is time to act. The only thing that passed on August 31, 2011 was the particular standards terms of the 2011 disclosure. The 2011 OVDI was simply a pre-agreed upon penalty structure. The IRS always welcomes voluntary disclosures.
There are 2 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 think currency laundering or drug trafficking. Once these prerequisites are satisfied, any criminal indictments are removed from the continuum of possibilities and the case is sent to the regular civil assessment 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 noteworthy, that's just a bill, they are insignificant 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 foreign tax law firm. The attorney-client privilege only applies in communications to an attorney. The Internal Revenue Service can subpoena nearly anyone else to testify against a taxpayer.
by: ken04d91gr
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