The 4 Choices For 2012 Ovdp You Should Know Now
So many people got caught off guard with the recent attention the Internal Revenue Service is giving holders of offshore foreign bank accounts
. So what to do? The last offshore voluntary disclosure initiative (OVDI) ended on August 31, 2011. With that in mind, here are the four options currently available to those wondering what to do.
The first option available is to roll the dice and pray for a miracle. The advantage is that it costs nothing to do, and there is certainly a possibility, no matter how slight, that the taxpayer can get away with the crime. The disadvantages are that if discovered, the penalties are severe. 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.
This is an important caveat. The chances are that the Internal Revenue Service does not discover unreported accounts gets more and more remote. 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 IRS 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 people 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.
The next option is to renounce nationality and leave the country --- as this is the only way to escape the taxing jurisdiction of the IRS. But be warned --- expatriation only works to avoid future tax debts and conformity problems. The lone way to correctly relinquish is to fundamentally come clean about all overseas foreign bank financial accounts and actually pay an expatriation tax (many commenters have noted that it was easier to leave cold war USSR with your wealth intact than the modern day USA. .)
This third way is to quietly filed amended 1040X's and not explicitedly tell the Internal Revenue Service that you are seeking to come clean. This is known as a "quiet" or "soft" disclosure. The advantage is that there is little upfront cost to this. But the disadvantages are that you may give the Internal Revenue Service a roadmap to charge you criminally, and if caught, you are experience a pain of 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 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 people whose "Quiet Disclosures" were discovered by the IRS.
There are other problems with "Quiet Disclosures." One massive failing is that a soft disclosure does not remedy the matter of the taxpayer's non-compliance in FBAR filing; 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 remove any possibility of criminal investigations. In fact, the amended return may --- well here's the problem with this alternative --- the soft disclosure does nothing about 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 roadmap 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, it is not too late. The only deal that expired on August 31, 2011 was the specific off-the-shelf terms of the 2011 disclosure. It was simply a pre-agreed upon penalty structure. The Internal revenue service always welcomes voluntary disclosures.
There are 2 main requirements. First, the taxpayer can't already be under audit or criminal investigation. And next, the foreign accounts cannot be connected to any criminal activity like currency laundering or drug trafficking. Once these prerequisites are satisfied, any criminal crimes are removed from the continuum of possibilities and the taxpayer's is referred 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 noteworthy, that's just a bill, they are insignificant compared to an .
If someone is still wondering what the suitable course of action is, it is critical that they only speak to a experienced offshore tax attorney. The attorney-client privilege only applies in communications to an attorney. The IRS can subpoena nearly anyone else to give evidence against a taxpayer.
by: josi1racyo
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