You Must Know These Four Choices About Ovdi Extension
If you are an American taxpayer with an offshore 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 IRS has not yet issued a new OVDI, so many non-compliant people 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.
Option One: Stick your head in the sand and hope that the IRS never catches you. Perhaps your account is at a foreign bank that you think to be "off the radar" or is in a quiet country, or under a friend's name, or opened with a non-US passport. Well, it used to be that a foreign bank account's actual owner could be kept anonymous. However, now, the Internal Revenue Service has vastly many more weapon at its disposal than it did previously to find secret accounts.
This is an important caveat. The chances are that the IRS does not discover secret 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 Internal Revenue Service wants information on US holders of foreign accounts, the IRS will get that information. The IRS 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. There is only way to escape the jurisdiction of the Internal Revenue Service taxing authority. That is, to renounce one's citizenship and no longer be a American citizen. The process is complicated. Also, 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 you fail to expatriate properly, you would still be subject to the jurisdiction of the US, meaning nothing was accomplished and you are still subject to all the requirements of the tax code. Renouncing your citizenship only gets rid of future tax liabilities, but you have to report the existence of secret financial accounts first.
The third option is to simply file amended returns and not explicitedly tell the IRS that you are seeking to voluntarily disclose. This is known as a "quiet" or "soft" disclosure. This is basically a "cheap" alternative and that's is only advantage . But the horrible possibilities are that you may give the Internal Revenue Service a roadmap to charge you criminally, and if you are caught, you are experience a pain of high penalties and a nasty and real possibility of criminal charges.
There may be serious problems with this alternative. One major drawback is that the Department of Justice states that it has begun criminal proceeding against citizens who attempted to utilize the "soft" disclosure process.
The "soft" disclosure option is incredibly risky for several reasons. One reason is that a soft disclosure does not address the problem of the taxpayer's non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. So filing a soft disclosure does not go far enough to remove any likelihood of criminal investigations. In fact, the amended return might --- well here's the terrific dilemma with this option --- the soft disclosure does nothing about the failure to the FBAR. There are still criminal and civil charges that may be pending for failing to file an FBAR, but simply give the IRS a very handy 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 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 thing that expired was the particular provisions of the 2011 OVDI which capped certain penalties.
There are 2 main requirements. First, the taxpayer can't already be under examination or criminal investigation. And next, the foreign accounts cannot be connected to criminal activity like money laundering or drug trafficking. Once these qualifications are satisfied, criminal charges come off the table and the taxpayer's is sent to the civil division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a promise of no criminal prosecution. Even though fines and penalties may be noteworthy, they are insignificant compared to an .
If someone is still wondering what the appropriate course of action is, it is imperative that they only talk to a qualified offshore tax lawyer. The attorney-client privilege only applies in communications to an attorney. The Internal Revenue Service can subpoena nearly anyone else to give evidence against a taxpayer.
by: dar3u75fpa
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