You Must Know These Four Choices About Tax Voluntary Disclosure
The IRS has authority 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 citizens thinking what to do, this piece talks about their four remaining options.
The first option available is to roll the dice and pray for a miracle. The advantage 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 extraordinary emotional strain for anybody 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.
Here's the thing despite what you hear, the US is still by far the largest ecomony in the world and has the richest population by far. Every foreign foreign bank must compete for American customers. And in order to do so, these banks must comply with what the Internal Revenue Service tell them to. In order to be on the good side of the IRS is to disclose what the IRS says to disclose. Accordingly the 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 an investigation, there is only one option leftpay outrageous taxes and the highest penalties and face the significant possibility of real jail time.
Option 2: Renounce citizenship; Leave the country. There is only way to escape the jurisdiction of the IRS taxing authority. That is, to renounce one's citizenship and no longer be a American 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 secret accounts first.
The third option is to simply file amended returns and not explicitedly tell the Internal Revenue Service 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 IRS 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 taxpayers who attempted to utilize the "soft" disclosure process.
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; failing to filing an FBAR can be a criminal charge just by itself. As a result simply filing a soft disclosure 't go far enough to eradicate any likelihood of criminal charges. In fact, the 1040X might --- well here's the problem with this option --- the quiet 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 roadmap to find you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. This is the optimal solution. Even though the time to disclosure under the 2011 initiative has expired, there is time to act. The only thing that expired on August 31, 2011 was the particular off-the-shelf terms of the 2011 disclosure. It was simply a pre-agreed upon penalty structure. The Internal revenue service always welcomes voluntary disclosures.
There are 2 main requirements. First, the taxpayer can't already be under audit or investigation. And next, the foreign accounts can't be connected to any criminal activity like currency laundering or drug trafficking. Once these prerequisites are satisfied, criminal indictments are removed from the continuum of possibilities and the taxpayer's is sent to the civil division for assessment of taxes, interest and penalties. A successful OVDI offers reduced penalties and a guarantee of absolutely no criminal charges. Although 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 attorneys, skilled in foreign compliance and sensitive Internal Revenue Service negotiations.
by: paus6hj3co
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