What You Want To Know About Offshore Accounts Disclosure
And the IRS 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. The Internal Revenue Service 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 taxpayers wondering what to do, this article discusses their 4 remaining options.
Option One: Stick your head in the sand and hope the IRS never catches you. Perhaps your foreign bank account is at a foreign 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 bank account's true owner could be kept anonymous. However, now, the IRS has vastly many more tools than it did previously to find secret accounts.
This is an important caveat. The chances are that the IRS does not discover undisclosed accounts gets smaller and smaller. Why? Because in order to compete for US customer and capital, foreign banks are coerced into complying with the IRS. That's right --- foreign banks take their marking orders from the IRS as well. So if the IRS wants information on US holders of foreign accounts, the IRS will get that information. The Internal Revenue Service will also run names of other individuals 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 IRS 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 IRS? 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 previously unreported financial accounts first.
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 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 DOJ claims that it has also begun prosecution of citizens whose "Quiet Disclosures" were discovered by the Internal revenue service.
There are other problems with "Quiet Disclosures." One reason is that they do not remedy the matter of the taxpayer's failure to report the bank account on the FBAR; failing to filing an FBAR can be a criminal charge just by itself. So simply filing a quiet disclosure 't go far enough to remove any possibility of criminal investigations. In fact, the amended return may --- well here's the terrific dilemma with this alternative --- the quiet disclosure does nothing about 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 IRS a roadmap to find you.
Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") If getting sleep at night and not worrying about going to prison is chief importance, there can be no question that this is the best option. Yes, the 2011 initiative expired, but that does not mean a voluntary disclosure can not be filed. The Internal Revenue Service always welcomes offshore disclosures. The only deadline that was missed was the particular terms of the 2011 OVDI which capped certain penalties.
There are two main requirements. First, the taxpayer cannot already be under audit or criminal investigation. And next, the foreign assets cannot be connected to criminal activity think currency laundering or drug trafficking. Once these prerequisites are satisfied, criminal crimes come off the table and the case is referred to the regular civil assessment division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a promise of no criminal prosecution. Although fines and penalties may be significant, they are insignificant compared to an .
If someone is still wondering what the suitable course of action is, it is imperative that they only talk to a qualified overseas tax attorney. The attorney-client privilege only applies when speaking to an lawyer. The IRS can subpoena a CPA or nearly anyone else to give evidence against a taxpayer.
by: dar3u75fpa
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