subject: What You Need To Know About Offshore Voluntary Disclosure Program [print this page] And the Internal Revenue Service 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 passed on August 31, 2011. For those people wondering what to do, this article discusses their four remaining options.
Option One: Do nothing. You could do nothing and hope that the Internal Revenue Service does not find out the account. Perhaps your foreign bank account is at a foreign bank that you believe 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 bank account's actual owner could be kept fairly secret. However, now, the IRS has vastly many more tools than it did previously to find previously unreported accounts.
Here's the thing every global banking and financial institution must be in the US marketplace or it would turn into such a minor league player that the foreign bank's corporate board would revolt and replace management --- immediately. Despite everything you may have heard, the American is still by far the largest economy in the world and every global foreign bank must be on the good side of the Internal Revenue Service otherwise that bank will be shut out of getting American capital or customers! In order to be on the good side of the Internal revenue service is to disclose what the IRS says to disclose. 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 becomes a more dangerous and dangerous. And once the Internal Revenue Service starts seeking a criminal indictment, there is only one option leftpay outrageous taxes and the highest penalties and face the significant possibility of real jail time.
The next option is to renounce nationality and depart the country --- as there is no other way to escape the power of the IRS. But be warned --- this only will avoid future tax debts and conformity problems. The only way to properly give up is to fundamentally come forward about all offshore bank accounts and actually forfeit an expatriation excise (many commenters have noted that it was easier to leave cold war USSR with your wealth intact than the modern day USA. .)
Option 3: Soft (or quiet) disclosure. An option that some people attempted is to file amended tax forms 1040X's and mail them to the Internal revenue service just think "regular" 1040X's, pay the taxes, and hope the IRS won't figure out what was going on. 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 1040X's 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 massive failing is that they do not address the matter of the taxpayer's failure to report the bank account on the FBAR; as a willful failure to file an FBAR is a criminal charge. As a result filing a quiet disclosure does not go far enough to remove any possibility of criminal investigations. In fact, the 1040X might --- well here's the problem 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 Internal revenue service a very handy to locate you.
Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") This is the optimal solution. Even though the time to file under the 2011 initiative has passed, it is not too late. The only thing that passed on August 31, 2011 was the specific standards terms of the 2011 OVDI. It was simply a pre-agreed upon penalty structure. The Internal revenue service always welcomes voluntary disclosures.
There are two main requirements. First, the taxpayer can't already be under audit or criminal investigation. And next, the foreign accounts cannot be connected to criminal activity think currency laundering or drug trafficking. Once these qualifications are met, any criminal indictments come off the table and the case is sent 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. Even though fines and penalties may be significant, they are meaningless compared to an .
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified OVDI attorneys, skilled in foreign compliance and sensitive IRS negotiations.
