subject: Voluntary Disclosure 2012 The Four Options You Do Have [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 people 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 that the Internal Revenue Service never catches you. Perhaps your account is at a bank that you believe to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-American passport. Well, it used to be that a bank account's true owner could be kept fairly secret. However, now, the IRS has vastly many more weapon at its disposal than it did previously to find undisclosed accounts.
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 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 IRS is to cough up what the IRS says to disclose. Consequently the bank is really at the mercy of the IRS.meaning so are the banks' account holders. So you see, hiding becomes riskier and riskier. 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.
The second option is to renounce citizenship and leave the country --- as this is the only way to escape the taxing jurisdiction of the IRS. But be warned --- this only will avoid future tax debts and conformity problems. The only method to correctly forsake is to essentially come clean about all foreign foreign bank assets and actually forfeit an expatriation tax (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 taxpayers tried is to file amended tax forms 1040X's and mail them to the IRS just like "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?
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.
There are other problems with "Quiet Disclosures." 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 quiet disclosure 't go far enough to eradicate any likelihood of criminal charges. In fact, the amended return might --- well here's the problem with this option --- it 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 IRS a very handy to find you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. This is the best option. Even though the time to file under the 2011 initiative has passed, it is not too late. The only deal that expired on August 31, 2011 was the particular off-the-shelf terms of the 2011 OVDI. The 2011 OVDI was simply a pre-agreed upon penalty arrangement. The Internal revenue service always welcomes voluntary disclosures.
There are 2 main requirements. First, the taxpayer cannot already be under audit or criminal investigation. And second, the foreign accounts cannot be connected to criminal activity think currency laundering or drug trafficking. Once these prerequisites are met, criminal charges come off the table and the case is sent to the civil division for assessment of taxes, interest and penalties. A successful OVDI offers reduced penalties and a guarantee of no criminal prosecution. Although fines and penalties may be considerable, that's just a bill, they are insignificant compared to an .
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified Offshore tax lawyers, skilled in foreign compliance and delicate Internal Revenue Service negotiations.
