Don" t Play With The Irs & Irs Faq Voluntary Disclosure
If you are an American taxpayer with an offshore foreign bank 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. These are the four options still available.
Option One: Do nothing. You could do nothing and hope that the IRS does not come across the account. Perhaps your foreign bank account is at a foreign bank that you think to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-US passport. Well, it used to be that a foreign 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 hidden accounts.
Here's the thing every global banking and financial organization must be in the American market otherwise it would become such a small time player that the foreign bank's shareholders would revolt and replace management --- immediately. Despite everything you may have heard, the US 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 foreign bank will be shut out of getting American capital or customers! Part of being on the good side of the IRS is to disclose what the IRS says to cough up. Therefore the foreign bank is really at the mercy of the IRS.meaning so are the banks' account holders. So you see, hiding behind the shadows becomes a more dangerous and dangerous. And once the IRS 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.
Option 2: Renounce citizenship; Leave the country. There is only way to escape the jurisdiction of the Internal Revenue Service taxing authority. That is, to renounce one's citizenship and no longer be a US citizen. The process is complicated. Also, a requirement of recognizable expatriation is that you have 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 Internal Revenue Service --- indefinitely . Expatriation may make sense to avoid future tax liabilities , but you have to disclose the existence of unreported accounts first.
The third option is to quietly filed amended 1040X's and not mention to the IRS that you are seeking to come clean. This is known as a "quiet" or "soft" disclosure. This is basically a "cheap" alternative and that's is only advantage . But the horrible possibilities are that you may give the Internal Revenue Service a very handy clue to charge you criminally, and if you are caught, you are see high penalties and a nasty and real possibility of criminal charges.
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 people who attempted to utilize the "soft" disclosure process.
The "soft" disclosure option is incredibly risky for several reasons. One reason is that they do not address the issue 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 likelihood of criminal investigations. In fact, the 1040X may --- well here's the terrific dilemma with this alternative --- the quiet disclosure does nothing about 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") This is the best option. Even though the time to disclosure under the 2011 OVDI has expired, it is not too late. The only thing that expired on August 31, 2011 was the specific off-the-shelf terms of the 2011 OVDI. The 2011 OVDI was simply a pre-agreed upon penalty structure. The Internal revenue service always welcomes voluntary disclosures.
There are only two requirements. Initially, the taxpayer can not be under audit. Also, the source of the money in the foreign bank accounts can not be from an illegal source. Like drug trafficking or money laundering.
If someone is still questioning what the proper course of action is, it is critical that they only speak to a experienced foreign tax attorney. The attorney-client privilege only applies in communications to an lawyer. The Internal Revenue Service can subpoena nearly anyone else to testify against a taxpayer.
Option One: Do nothing. You could do nothing and hope that the IRS does not come across the account. Perhaps your foreign bank account is at a foreign bank that you think to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-US passport. Well, it used to be that a foreign 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 hidden accounts.
Here's the thing every global banking and financial organization must be in the American market otherwise it would become such a small time player that the foreign bank's shareholders would revolt and replace management --- immediately. Despite everything you may have heard, the US 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 foreign bank will be shut out of getting American capital or customers! Part of being on the good side of the IRS is to disclose what the IRS says to cough up. Therefore the foreign bank is really at the mercy of the IRS.meaning so are the banks' account holders. So you see, hiding behind the shadows becomes a more dangerous and dangerous. And once the IRS 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.
Option 2: Renounce citizenship; Leave the country. There is only way to escape the jurisdiction of the Internal Revenue Service taxing authority. That is, to renounce one's citizenship and no longer be a US citizen. The process is complicated. Also, a requirement of recognizable expatriation is that you have 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 Internal Revenue Service --- indefinitely . Expatriation may make sense to avoid future tax liabilities , but you have to disclose the existence of unreported accounts first.
The third option is to quietly filed amended 1040X's and not mention to the IRS that you are seeking to come clean. This is known as a "quiet" or "soft" disclosure. This is basically a "cheap" alternative and that's is only advantage . But the horrible possibilities are that you may give the Internal Revenue Service a very handy clue to charge you criminally, and if you are caught, you are see high penalties and a nasty and real possibility of criminal charges.
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 people who attempted to utilize the "soft" disclosure process.
The "soft" disclosure option is incredibly risky for several reasons. One reason is that they do not address the issue 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 likelihood of criminal investigations. In fact, the 1040X may --- well here's the terrific dilemma with this alternative --- the quiet disclosure does nothing about 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") This is the best option. Even though the time to disclosure under the 2011 OVDI has expired, it is not too late. The only thing that expired on August 31, 2011 was the specific off-the-shelf terms of the 2011 OVDI. The 2011 OVDI was simply a pre-agreed upon penalty structure. The Internal revenue service always welcomes voluntary disclosures.
There are only two requirements. Initially, the taxpayer can not be under audit. Also, the source of the money in the foreign bank accounts can not be from an illegal source. Like drug trafficking or money laundering.
If someone is still questioning what the proper course of action is, it is critical that they only speak to a experienced foreign tax attorney. The attorney-client privilege only applies in communications to an lawyer. The Internal Revenue Service can subpoena nearly anyone else to testify against a taxpayer.
Source...