The 4 Issues You Want To Know About Offshore Voluntary Disclosure Program

The Internal Revenue Service has power to tax income from around the globe

. The IRS has universal jurisdiction to tax income anywhere it is earned --- even it was earned on the moon. Not only that, it is a crime not to tell the Internal Revenue Service about foreign accounts if their value exceeds $10,000.00 by filing an FBAR form every June. The IRS offered two previous offshore voluntary disclosure initiatives. One in 2009 and the last one in 2011. The last one expired on August 31, 2011. For those people 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 bank account is at a bank that you believe to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-American passport. Well, it used to be that a foreign bank account's actual owner could be kept fairly secret. However, now, the Internal Revenue Service has vastly many more tools than it did previously to find secret accounts.

This is an important caveat. The chances are that the Internal Revenue Service does not discover undisclosed 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 Internal Revenue Service as well. So if the IRS wants information on American holders of foreign accounts, the Internal Revenue Service will get that information. The Internal Revenue Service will also run names of other people it suspects of being American citizens but who opened their accounts with foreign passports. The Internal Revenue Service 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 Internal Revenue Service. But be warned --- this only will avoid upcoming tax debts and compliance problems. The only method to correctly renounce is to essentially come clean about all overseas bank assets and actually pay an expatriation excise (many commenters have noted that it was easier to leave cold war USSR with your wealth intact than the modern day USA. .)

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 Internal revenue service says that these 1040X's are "red flags." Even though the tax returns are amended and back taxes paid, the Internal revenue service 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.

There are other problems with "Quiet Disclosures." One massive failing is that a soft disclosure does not remedy the issue of the taxpayer's non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. So simply filing a soft disclosure 't go far enough to remove any possibility of criminal charges. In fact, the 1040X might --- well here's the massive problem with this alternative --- 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 Internal revenue service a very handy to find you.

The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. This is the best option. Even though the time to disclosure under the 2011 initiative has expired, it is not too late. The only deal that expired on August 31, 2011 was the specific standards terms of the 2011 disclosure. The 2011 OVDI was simply a pre-agreed upon penalty arrangement. The IRS always welcomes voluntary disclosures.

There are 2 main requirements. First, the taxpayer cannot already be under examination or investigation. And next, the foreign financial accounts cannot be connected to criminal activity like money laundering or drug trafficking. Once these prerequisites are satisfied, criminal charges 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 voluntary disclosure offers reduced penalties and a guarantee of absolutely no criminal charges. Even though fines and penalties may be considerable, 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 lawyers, experienced in offshore compliance and sensitive Internal Revenue Service negotiations.

by: car4xc31hu

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