Offshore Amnesty What Are Your Four Options
And the Internal Revenue Service demands to know where all the people foreign accounts
are located --- it is a crime to keep these foreign bank account secret if they are over $10,000.00 in value. The Internal Revenue Service offered two previous offshore voluntary disclosure initiatives. One in 2009 and the last one in 2011. 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 is to do nothing except hope and pray. The advantage is that it costs zero to do, and there is certainly a possibility, no matter how small, that the taxpayer can get away with the crime. The disadvantages are that if caught, the penalties are harsh. In both monetary cost and in emotional drain of being charged with a federal crime. 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 more and more remote. Why? Because in order to compete for American 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 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 IRS 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 Internal Revenue Service taxing authority. That is, to renounce one's citizenship and no longer be a US citizen. The process is not as easy as you may think. Additionally, 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. Expatriation may make sense to avoid future tax liabilities , but you have to inform the IRS about the existence of previously unreported accounts first.
The third option is to quietly filed amended 1040X's and not explicitedly tell the IRS 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 IRS a roadmap to charge you criminally, and if you are caught, you are experience a pain of 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.
There are other problems with "Quiet Disclosures." One massive failing is that a soft disclosure does not address the matter of the taxpayer's non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. So filing a soft disclosure does not go far enough to eradicate any likelihood of criminal investigations. In fact, the amended return might --- well here's the problem with this alternative --- the soft disclosure does nothing concerning 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 IRS a very handy to locate you.
Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") This is the best option. Even though the time to file under the 2011 initiative has expired, there is time to act. The only thing that passed on August 31, 2011 was the particular off-the-shelf terms of the 2011 disclosure. The 2011 OVDI was simply a pre-agreed upon penalty arrangement. The IRS always welcomes voluntary disclosures.
There are two main requirements. First, the taxpayer can't already be under audit or investigation. And next, the foreign accounts cannot be connected to any criminal activity think money laundering or drug trafficking. Once these prerequisites are satisfied, any criminal crimes come off the table and the case is referred to the civil division for assessment of taxes, interest and penalties. A successful OVDI offers reduced penalties and a promise of absolutely no criminal charges. Although fines and penalties may be significant, they are insignificant compared to an .
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified OVDI lawyers, skilled in overseas compliance and sensitive Internal Revenue Service negotiations.
by: josi1racyo
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