subject: The Four Choices For Ovdp You Should Know Now [print this page] So many citizens got caught off guard with the recent attention the IRS is giving holders of offshore bank accounts. 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 (OVDP) have ended, the Internal Revenue Service has not yet issued a new OVDP, so many non-compliant taxpayers are wondering if they should come forward and what the cost of coming forward will be. These are the four options still available.
Option One: Stick your head in the sand and pray the IRS never catches you. Perhaps your foreign foreign bank account is at a foreign bank that you think to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-US passport. Well, it used to be that a bank account's true 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 unreported accounts.
Here's the thing every global banking and financial organization must be in the American marketplace or it would turn into such a minor league player that the foreign bank's shareholders would revolt. Despite everything you may have heard, the US is still by far the largest economy in the world and every global bank must be on the good side of the Internal Revenue Service otherwise that foreign bank will be shut out of getting US capital or customers! Part of being on the good side of the Internal revenue service is to cough up what the IRS says to cough up. So the foreign 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 IRS starts an investigation, there are no option left exceptpay outrageous taxes and the highest penalties and face the significant possibility of real jail time.
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 complicated. Also, a requirement of recognizable 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 disclose the existence of hidden financial accounts first.
Option 3: Soft (or quiet) disclosure. An option that some taxpayers tried is to file amended tax forms 1040X's and mail them to the IRS just think "regular" 1040X's, pay the taxes, and hope the Internal Revenue Service won't figure out what was going on. Doesn't this seems like a fool-proof game-plan? Perhaps one could avoid all those excessive penalties of the OVDP programs?
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 people 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 matter of the taxpayer's non-compliance in FBAR filing; as a willful failure to file an FBAR is a criminal charge. So simply filing a soft disclosure does not go far enough to eliminate any possibility of criminal charges. In fact, the amended return might --- well here's the massive problem with this alternative --- it 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 Internal revenue service 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 OVDP has expired, it is not too late. The only deal that passed on August 31, 2011 was the particular off-the-shelf terms of the 2011 OVDP. It was simply a pre-agreed upon penalty arrangement. The Internal revenue service always welcomes voluntary disclosures.
There are 2 main requirements. First, the taxpayer can't already be under examination or criminal investigation. And second, the foreign assets cannot be connected to any criminal activity like currency laundering or drug trafficking. Once these prerequisites are met, criminal indictments come off the table and the case is referred to the civil division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a guarantee of absolutely no criminal charges. Although fines and penalties may be noteworthy, 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 delicate Internal Revenue Service negotiations.
