subject: Offshore Voluntary Disclosure Initiative Do You Know Your Options [print this page] 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 Internal Revenue Service has not yet issued a new OVDI, so many non-compliant citizens 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 is to do nothing except hope and pray. The advantage is that it costs zero to do, and there is certainly a likelihood of greater than zero, no matter how minor, that the taxpayer can get away with the crime. The disadvantages are that if discovered, the penalties are severe. In both financial cost and in emotional drain of being charged with a federal crime. Even if found not guilty, a criminal trial is still incredibly costly.
Here's the thing despite what you hear, the American is still by far the largest ecomony in the world and has the richest population by far. Every foreign bank must compete for US customers. And in order to do so, these banks must comply with what the IRS tell them to. In order to be on the good side of the Internal revenue service is to disclose what the Internal Revenue Service says to cough up. So the foreign bank is really at the mercy of the Internal Revenue Service.meaning so are the banks' foreign account holders. So you see, hiding 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.
The second option is to renounce citizenship and depart the country --- as there is no other way to escape the power of the Internal Revenue Service. But be warned --- this only works to dodge upcoming tax debts and conformity issues. The only technique to properly relinquish is to essentially come forward about all offshore bank accounts and actually pay an expatriation excise (in many ways it was easier to leave Soviet Block country than to leave the USA completely intact with your wealth.)
Option 3: Soft (or quiet) disclosure. An option that some taxpayers attempted 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 IRS won't figure out what was going on. Sounds think 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 IRS tells says that account holders will still face penalties and criminal charges. In addition to charging and prosecuting people with undeclared foreign income, the Department of Justice claims that it has also begun prosecution of taxpayers whose "Quiet Disclosures" were discovered by the IRS.
The "soft" disclosure option is incredibly risky for several reasons. One reason is that they do 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. As a result simply filing a soft disclosure 't go far enough to remove any possibility of criminal investigations. In fact, the amended return might --- well here's the terrific dilemma with this option --- 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 locate you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. If enjoying the rest of your life 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 IRS always welcomes offshore disclosures. The only thing that expired was the particular provisions of the 2011 OVDI which capped certain penalties.
There are two main requirements. First, the taxpayer cannot already be under examination or criminal investigation. And second, the foreign assets can't be connected to criminal activity like money laundering or drug trafficking. Once these prerequisites are met, any criminal indictments come off the table and the case is sent 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. Even though fines and penalties may be noteworthy, they are meaningless compared to an .
If someone is still wondering what the suitable course of action is, it is imperative that they only speak to a qualified foreign tax lawyer. The attorney-client privilege only applies in communications to an lawyer. The Internal Revenue Service can subpoena nearly anyone else to give evidence against a taxpayer.
