The 4 Choices For Fbar Voluntary Disclosure You Must Know Now
And the Internal Revenue Service 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 Internal Revenue Service ran two offshore voluntary disclosure initiatives (OVDI). The last one passed on August 31, 2011. For those citizens wondering what to do, this article discusses their four remaining options.
The first option available is to roll the dice and pray for a miracle. The benefit is that it costs zero 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 caught, the penalties are severe. 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.
Here's the thing every global banking and financial institution must be in the American marketplace otherwise it would turn into such a small time player that the bank's shareholders would revolt and replace management --- immediately. Despite everything you may have heard, the US is still by far the largest economy in the world and every global bank must be on the good side of the Internal Revenue Service otherwise that foreign bank will be shut out of getting American capital or customers! Part of being on the good side of the Internal revenue service is to cough up what the IRS says to disclose. Consequently the foreign bank is really at the mercy of the Internal Revenue Service.meaning so are the banks' account holders. So you see, hiding behind the shadows becomes a more dangerous and dangerous. And once the Internal Revenue Service starts seeking a criminal indictment, there are no option left exceptpay outrageous taxes and the highest penalties and face the significant possibility of real jail time.
Option 2: Renounce citizenship; Leave the country. Do you want to say goodbye to the Internal Revenue Service? There is only one way to do it. 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 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 the expatriation is handled improperly, the IRS treats it as a non-event, meaning you are still subject to the jurisdiction of the IRS --- indefinitely . Expatriation may make sense to avoid future tax liabilities , but you have to disclose the existence of undisclosed accounts first.
Option 3: Soft (or quiet) disclosure. An option that some people attempted is to file amended tax forms 1040X's and mail them to the IRS just like "regular" 1040X's, pay the taxes, and hope the Internal Revenue Service won't figure out what was going on. Doesn't this seems like a fool-proof game-plan? Perhaps one could avoid all those excessive penalties of the OVDI programs?
The Internal revenue service says that these amended returns are "red flags." Even though the tax returns are amended and back taxes paid, the IRS tells says that foreign 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.
The "soft" disclosure option is incredibly risky for several reasons. One reason is that they do not remedy the matter 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. So simply filing a soft disclosure 't go far enough to remove any possibility of criminal charges. In fact, the 1040X may --- well here's the problem with this alternative --- 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 find you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. If getting sleep at night and not worrying about going to prison is chief importance, there can be no doubt that this alternative 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 deadline that was missed was the particular stipulations of the 2011 OVDI which capped certain penalties.
There are only two requirements. Initially, the taxpayer can not be under audit. Also, the source of the funds in the foreign bank accounts can not be from an illegal source. Think drug trafficking or money laundering.
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified OVDI lawyers, experienced in overseas compliance and sensitive Internal Revenue Service negotiations.
by: ken04d91gr
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