subject: Are You Well Informed Of Your Voluntary Disclosure Program 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 taxpayers 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 available is to roll the dice and pray for a miracle. The advantage is that it costs nothing 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 caught, there is an unbelievable 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 every global banking and financial institution must be in the US market otherwise it would become such a small time player that the foreign bank's corporate board would revolt. 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 IRS otherwise that foreign bank will be shut out of getting US capital or customers! Part of being on the good side of the IRS is to cough up what the Internal Revenue Service says to cough up. Therefore 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 riskier and riskier. 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.
Option 2: Renounce citizenship; Leave the country. Do you want to say goodbye to the Internal Revenue Service? 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 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 Internal Revenue Service treats it as a non-event, meaning you are still subject to the jurisdiction of the IRS --- indefinitely . Renouncing your citizenship only gets rid of future tax liabilities, but you have to report the existence of unreported financial accounts first.
Option 3: Soft (or quiet) disclosure. One option is to file amended returns, this time including previously unreported income simply filing the returns as if it were simply forgotten income. Sounds think a good strategy, right? Perhaps one could avoid all those excessive penalties of the OVDI programs?
The Department of Justice states that it has begun prosecutions on people who have attempted soft disclosures. So this option has some serious problems
The "soft" disclosure option is incredibly risky for several reasons. One massive failing is that a soft disclosure does not remedy 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. So simply filing a soft disclosure does not go far enough to eradicate any likelihood of criminal investigations. In fact, the amended return may --- well here's the problem with this option --- it does nothing concerning the failure to the FBAR. There are still criminal and civil investigations 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 file under the 2011 OVDI has passed, it is not too late. The only deal that expired on August 31, 2011 was the particular standards terms of the 2011 OVDI. The 2011 OVDI was simply a pre-agreed upon penalty arrangement. The IRS always welcomes voluntary disclosures.
There are 2 main requirements. First, the taxpayer can't already be under examination or investigation. And next, the foreign financial accounts cannot be connected to any criminal activity like currency laundering or drug trafficking. Once these qualifications are met, criminal charges come off the table 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, they are insignificant compared to an .
If someone is still wondering what the appropriate course of action is, it is critical that they only speak to a qualified offshore tax lawyer. The attorney-client privilege only applies in communications to an lawyer. The IRS can subpoena a CPA or nearly anyone else to testify against a taxpayer.
