subject: What There Is To Know About Ovdi Extension Do You Know [print this page] The IRS has power to tax income from around the globe. The Internal Revenue Service has universal jurisdiction to tax income anywhere it is earned --- even it was earned on the moon. Not only that, it is a crime not to tell the Internal Revenue Service about foreign accounts if their value exceeds $10,000.00 by filing an FBAR form every June. The IRS offered two previous offshore voluntary disclosure initiatives. One in 2009 and the last one in 2011. The last one expired on August 31, 2011. For those taxpayers wondering what to do, this article talks about their four remaining options.
The first option is to do nothing except hope and pray. The benefit is that it costs nothing 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 downside that is if learned, there is an incredible emotional strain for anyone 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 despite what you hear, the US is still by far the largest ecomony in the world and has the richest population by far. Every foreign foreign bank must compete for American customers. And in order to do so, these banks must comply with what the Internal Revenue Service tell them to. Part of being on the good side of the Internal revenue service is to cough up what the IRS says to cough up. As a result 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 are no option left exceptpay outrageous taxes and the highest penalties and face the significant possibility of real jail time.
The next option is to renounce nationality and leave the country --- as this is the only way to escape the taxing jurisdiction of the Internal Revenue Service. But be warned --- expatriation only works to dodge future tax debts and submission troubles. The lone technique to correctly abandon is to essentially come forward about all foreign foreign bank assets and actually forfeit an expatriation tax (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. 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 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 DOJ claims that it has also begun prosecution of people 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 non-compliance in FBAR filing; as a willful failure to file an FBAR is a criminal charge. So filing a soft disclosure does not go far enough to eradicate any likelihood of criminal charges. In fact, the 1040X might --- 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 very handy to find you.
Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") If getting sleep at night and not worrying about going to prison is chief concern, there can be no doubt that this alternative is the best option. Yes, the 2011 initiative expired, but that does not mean a voluntary disclosure can not be filed. The Internal Revenue Service always welcomes offshore disclosures. The only deadline that was missed was the particular provisions of the 2011 OVDI which capped certain penalties.
There are only two requirements. Initially, the taxpayer can not be under examination. Also, the source of the money in the foreign bank accounts can not be from an illegal source. Think drug trafficking or money laundering.
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified Offshore tax attorneys, experienced in offshore compliance and sensitive Internal Revenue Service negotiations.
