So many people got caught off guard with the recent attention the Internal Revenue Service is giving holders of offshore foreign bank accounts. 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 citizens 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 the IRS never catches you. Perhaps your foreign bank account is at a 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 foreign bank account's true owner could be kept fairly secret. However, now, the IRS has vastly many more tools than it ever did previously to find hidden accounts.
Here's the thing every global banking and financial institution must be in the American marketplace or it would become such a small time player that the foreign bank's corporate board would revolt. Despite everything you may have heard, the US is still by far the largest economy in the world and every global bank must be on the good side of the Internal Revenue Service otherwise that bank will be shut out of getting US capital or customers! In order to be on the good side of the Internal revenue service is to cough up what the IRS says to cough up. As a result the bank is really at the mercy of the Internal Revenue Service.meaning so are the banks' foreign account holders. So you see, hiding behind the shadows becomes a more dangerous and dangerous. And once the Internal Revenue Service starts an investigation, 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. 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 American citizen. The process is not as easy as you may think. Also, a requirement of proper 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 IRS treats it as a non-event, meaning you are still subject to the jurisdiction of the IRS --- indefinitely . Expatriation may make sense to avoid future tax liabilities , but you have to report the existence of undisclosed financial accounts first.
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 Department of Justice states that it has begun prosecutions on people who have attempted soft disclosures. So this option has some serious problems
There are other problems with "Quiet Disclosures." One reason is that a soft disclosure does not remedy the issue 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 quiet disclosure 't go far enough to eradicate any likelihood of criminal investigations. In fact, the amended return may --- well here's the problem with this alternative --- the quiet disclosure 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 locate you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. This is the optimal solution. Even though the time to disclosure under the 2011 OVDI has passed, there is time to act. The only deal that passed on August 31, 2011 was the specific off-the-shelf terms of the 2011 OVDI. It was simply a pre-agreed upon penalty arrangement. The IRS always welcomes voluntary disclosures.
There are 2 main requirements. First, the taxpayer cannot already be under audit or criminal investigation. And second, the foreign assets cannot be connected to any criminal activity like currency laundering or drug trafficking. Once these qualifications are satisfied, any criminal crimes come off the table and the case is sent to the civil division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a promise of absolutely no criminal charges. Even though fines and penalties may be substantial, 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, experienced in overseas compliance and sensitive IRS negotiations.
Option One: Stick your head in the sand and pray the IRS never catches you. Perhaps your foreign bank account is at a 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 foreign bank account's true owner could be kept fairly secret. However, now, the IRS has vastly many more tools than it ever did previously to find hidden accounts.
Here's the thing every global banking and financial institution must be in the American marketplace or it would become such a small time player that the foreign bank's corporate board would revolt. Despite everything you may have heard, the US is still by far the largest economy in the world and every global bank must be on the good side of the Internal Revenue Service otherwise that bank will be shut out of getting US capital or customers! In order to be on the good side of the Internal revenue service is to cough up what the IRS says to cough up. As a result the bank is really at the mercy of the Internal Revenue Service.meaning so are the banks' foreign account holders. So you see, hiding behind the shadows becomes a more dangerous and dangerous. And once the Internal Revenue Service starts an investigation, 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. 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 American citizen. The process is not as easy as you may think. Also, a requirement of proper 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 IRS treats it as a non-event, meaning you are still subject to the jurisdiction of the IRS --- indefinitely . Expatriation may make sense to avoid future tax liabilities , but you have to report the existence of undisclosed financial accounts first.
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 Department of Justice states that it has begun prosecutions on people who have attempted soft disclosures. So this option has some serious problems
There are other problems with "Quiet Disclosures." One reason is that a soft disclosure does not remedy the issue 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 quiet disclosure 't go far enough to eradicate any likelihood of criminal investigations. In fact, the amended return may --- well here's the problem with this alternative --- the quiet disclosure 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 locate you.
The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. This is the optimal solution. Even though the time to disclosure under the 2011 OVDI has passed, there is time to act. The only deal that passed on August 31, 2011 was the specific off-the-shelf terms of the 2011 OVDI. It was simply a pre-agreed upon penalty arrangement. The IRS always welcomes voluntary disclosures.
There are 2 main requirements. First, the taxpayer cannot already be under audit or criminal investigation. And second, the foreign assets cannot be connected to any criminal activity like currency laundering or drug trafficking. Once these qualifications are satisfied, any criminal crimes come off the table and the case is sent to the civil division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a promise of absolutely no criminal charges. Even though fines and penalties may be substantial, 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, experienced in overseas compliance and sensitive IRS negotiations.