Ovdi Do You Know Your Options
And the Internal Revenue Service demands to know where all the taxpayers foreign accounts are located --- it is a crime to keep these foreign bank account secret if they are over $10,000.00 in value. The Internal Revenue Service 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 thinking what to do, this piece discusses their 4 remaining options.
The first option is to do nothing except hope and pray. The benefit is that it costs zero to do, and there is certainly a possibility, no matter how small, that the taxpayer can get away with the crime. The downside that is if discovered, there is an incredible 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.
This is an important caveat. The chances are that the Internal Revenue Service does not discover hidden accounts gets smaller and smaller. Why? Because in order to compete for US customer and capital, foreign banks are coerced into complying with the Internal Revenue Service. That's right --- foreign banks take their marking orders from the Internal Revenue Service as well. So if the Internal Revenue Service wants information on American holders of foreign accounts, the IRS will get that information. The Internal Revenue Service will also run names of other people it suspects of being US citizens but who opened their accounts with foreign passports. The Internal Revenue Service has more power and intelligence that it ever had before. The IRS has the manpower and field agents in every major city around the globe.
Option 2: Renounce citizenship; Leave the country. Do you want to say goodbye to the IRS? 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 you fail to expatriate properly, you would still be subject to the jurisdiction of the US, meaning nothing was accomplished and you are still subject to all the requirements of the tax code. Renouncing your citizenship only gets rid of future tax liabilities, but you have to inform the IRS about the existence of secret financial 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. The advantage is that there is little upfront cost to this. 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 experience a pain of high penalties and a nasty and real possibility of criminal charges.
The IRS says that these amended returns are "red flags." Even though the tax returns are amended and back taxes paid, the Internal revenue service tells says that account holders will still face penalties and criminal charges. In addition to charging and prosecuting people with undeclared foreign income, the Department of Justice claims that it has also begun prosecution of taxpayers whose "Quiet Disclosures" were discovered by the Internal revenue service.
There are other problems with "Quiet Disclosures." One massive failing is that they do not remedy the issue 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 does not go far enough to eliminate any likelihood of criminal investigations. In fact, the amended return might --- well here's the terrific dilemma with this alternative --- the quiet disclosure does nothing concerning the failure to the FBAR. 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 importance, 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 Internal Revenue Service always welcomes offshore disclosures. The only thing that expired was the particular conditions of the 2011 OVDI which capped certain penalties.
There are two main requirements. First, the taxpayer can't already be under examination or investigation. And next, the foreign accounts cannot be connected to any criminal activity think currency laundering or drug trafficking. Once these qualifications are met, any criminal crimes are removed from the continuum of possibilities and the taxpayer's is referred to the regular civil assessment 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 substantial, that's just a bill, they are meaningless compared to an .
If someone is still wondering what the appropriate course of action is, it is critical that they only talk to a qualified offshore tax attorney. The attorney-client privilege only applies when speaking to an attorney. The IRS can subpoena a CPA or nearly anyone else to give evidence against a taxpayer.
The first option is to do nothing except hope and pray. The benefit is that it costs zero to do, and there is certainly a possibility, no matter how small, that the taxpayer can get away with the crime. The downside that is if discovered, there is an incredible 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.
This is an important caveat. The chances are that the Internal Revenue Service does not discover hidden accounts gets smaller and smaller. Why? Because in order to compete for US customer and capital, foreign banks are coerced into complying with the Internal Revenue Service. That's right --- foreign banks take their marking orders from the Internal Revenue Service as well. So if the Internal Revenue Service wants information on American holders of foreign accounts, the IRS will get that information. The Internal Revenue Service will also run names of other people it suspects of being US citizens but who opened their accounts with foreign passports. The Internal Revenue Service has more power and intelligence that it ever had before. The IRS has the manpower and field agents in every major city around the globe.
Option 2: Renounce citizenship; Leave the country. Do you want to say goodbye to the IRS? 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 you fail to expatriate properly, you would still be subject to the jurisdiction of the US, meaning nothing was accomplished and you are still subject to all the requirements of the tax code. Renouncing your citizenship only gets rid of future tax liabilities, but you have to inform the IRS about the existence of secret financial 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. The advantage is that there is little upfront cost to this. 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 experience a pain of high penalties and a nasty and real possibility of criminal charges.
The IRS says that these amended returns are "red flags." Even though the tax returns are amended and back taxes paid, the Internal revenue service tells says that account holders will still face penalties and criminal charges. In addition to charging and prosecuting people with undeclared foreign income, the Department of Justice claims that it has also begun prosecution of taxpayers whose "Quiet Disclosures" were discovered by the Internal revenue service.
There are other problems with "Quiet Disclosures." One massive failing is that they do not remedy the issue 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 does not go far enough to eliminate any likelihood of criminal investigations. In fact, the amended return might --- well here's the terrific dilemma with this alternative --- the quiet disclosure does nothing concerning the failure to the FBAR. 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 importance, 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 Internal Revenue Service always welcomes offshore disclosures. The only thing that expired was the particular conditions of the 2011 OVDI which capped certain penalties.
There are two main requirements. First, the taxpayer can't already be under examination or investigation. And next, the foreign accounts cannot be connected to any criminal activity think currency laundering or drug trafficking. Once these qualifications are met, any criminal crimes are removed from the continuum of possibilities and the taxpayer's is referred to the regular civil assessment 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 substantial, that's just a bill, they are meaningless compared to an .
If someone is still wondering what the appropriate course of action is, it is critical that they only talk to a qualified offshore tax attorney. The attorney-client privilege only applies when speaking to an attorney. The IRS can subpoena a CPA or nearly anyone else to give evidence against a taxpayer.