What Are Your Four Choices With Irs Ovdi
If you are an American taxpayer with an offshore foreign bank accounts that you thought were secret
, you must bring it into compliance that is file missing FBARs and include any missing income on amended tax returns. With the off-the-shelf deals previously offered, the terms of the settlement were known and predictable. Now that the 2009 and 2011 offshore voluntary disclosure initiatives (OVDI) have ended, the Internal Revenue Service has not yet issued a new OVDI, so many non-compliant taxpayers are wondering if they should come forward and what the cost of coming forward will be. 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 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 downside that is if learned, there is an incredible emotional strain for anyone who become a criminal defendant. Even if acquitted, the entire process will be the most arduous time of someone's life. Even if found not guilty, a criminal trial is still incredibly costly.
This is an important caveat. The chances are that the IRS does not discover previously unreported 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 IRS as well. So if the Internal Revenue Service wants information on American holders of foreign accounts, the IRS will get that information. The Internal Revenue Service 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.
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 American citizen. The process is complicated. Furthermore, 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 Internal Revenue Service --- indefinitely . Expatriation may make sense to avoid future tax liabilities , but you have to inform the IRS about the existence of unreported financial accounts first.
This third way is to quietly filed amended 1040X's and not mention to the Internal Revenue Service that you are seeking to come clean. 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 see high penalties and a nasty and real possibility of criminal charges.
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; as a willful failure to file an FBAR is a criminal charge. As a result simply filing a quiet 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 soft disclosure does nothing concerning the failure to FBAR forms. There are still criminal and civil charges that may be pending for failing to file an FBAR, but simply give the Internal revenue service a very handy to find 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 thing that passed 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 only two requirements. First, the taxpayer can not be under audit. In addition, the source of the money 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 attorneys, experienced in foreign compliance and sensitive IRS negotiations.
by: dar3u75fpa
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