subject: What To Do About Ovdi India [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. So what to do? The last offshore
voluntary disclosure initiative (OVDI) ended on August 31, 2011. These are the four options still available.
Option One: Stick your head in the sand and hope the IRS never catches you. Perhaps your account is at a
foreign bank that you think 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 true
owner could be kept fairly secret. However, now, the Internal Revenue Service has vastly
many more tools than it ever did previously to find
previously unreported accounts.
This is an important caveat. The
chances are that the Internal Revenue Service does not discover unreported accounts gets more and more remote. Why? Because in order to compete for US customer and capital, foreign banks are coerced into complying with the IRS. That's
right --- foreign banks take their marking orders from the IRS as well. So if the Internal
Revenue Service wants information on US holders of foreign accounts, the Internal Revenue Service will
get that information. The Internal Revenue Service will also run names of other individuals it suspects of being American citizens but who opened their accounts with foreign passports. The IRS has incredible investigative powers --- powers it never had before.
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 --- expatriation only will dodge upcoming tax debts and compliance problems. The only method to properly
forsake is to effectively come clean about all
overseas bank financial records 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. One option is to file amended returns, this time including previously unreported
income simply filing the returns as if it were simply forgotten income.
Doesn't this seems like a fool-proof game-plan? 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 reason is that they do not remedy the matter of the taxpayer's failure to report the bank account on the FBAR; failing to filing an FBAR can be a criminal charge just by itself. As a
result filing a soft disclosure 't go far enough to eliminate any
likelihood of criminal charges. In fact, the 1040X might --- well
here's the terrific dilemma with this alternative --- it
does nothing concerning 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
roadmap to locate you.
Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") If enjoying the rest of your life is chief concern, 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 deadline that was missed was the particular provisions of
the 2011 OVDI which capped certain penalties.
There are 2 main requirements. First, the taxpayer cannot already be under examination or
criminal investigation. And next, the foreign financial accounts cannot
be connected to criminal activity like money laundering or drug trafficking. Once these
qualifications are met, any criminal charges come off the
table and the taxpayer's is sent to the regular civil assessment division for assessment of taxes, interest and penalties. A
successful OVDI offers reduced penalties and a promise of no criminal prosecution. Even though fines and penalties may be considerable, 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 IRS negotiations.
