Ovdi Extension The 4 Things You Need To Know
So many taxpayers got caught off guard with the recent attention the Internal Revenue Service is giving holders of offshore 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 IRS 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.
The first option available is to roll the dice and pray for a miracle. The advantage is that it costs nothing to do, and there is certainly a likelihood of greater than zero, 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 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 every global banking and financial organization must be in the US marketplace otherwise it would turn into such a small time player that the foreign bank's corporate board 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 bank must be on the good side of the Internal Revenue Service otherwise that foreign bank will be shut out of getting US capital or customers! Part of being on the good side of the Internal revenue service is to cough up what the Internal Revenue Service says to disclose. Accordingly the foreign bank is really at the mercy of the Internal Revenue Service.meaning so are the banks' account holders. So you see, hiding behind the shadows becomes riskier and riskier. 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 complicated. Additionally, 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 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 disclose the existence of previously unreported financial accounts first.
Option 3: Soft (or quiet) disclosure. An option that some people tried is to file amended tax forms 1040X's and mail them to the IRS just think "regular" 1040X's, pay the taxes, and hope the IRS won't figure out what was going on. Doesn't this seems like a fool-proof game-plan? Perhaps one could avoid all those excessive penalties of the OVDI programs?
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 taxpayers who attempted to utilize the "soft" disclosure process.
There are other problems with "Quiet Disclosures." One massive failing is that a soft disclosure does not remedy the matter of the taxpayer's non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. As a result filing a quiet disclosure does not go far enough to remove any likelihood of criminal charges. In fact, the 1040X may --- well here's the problem with this alternative --- the quiet disclosure does nothing about 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 doubt 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 stipulations of the 2011 OVDI which capped certain penalties.
There are only two requirements. First, 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 imperative that they only talk to a experienced offshore tax law firm. The attorney-client privilege only applies when speaking to an lawyer. The Internal Revenue Service can subpoena a CPA or nearly anyone else to testify against a taxpayer.
The first option available is to roll the dice and pray for a miracle. The advantage is that it costs nothing to do, and there is certainly a likelihood of greater than zero, 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 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 every global banking and financial organization must be in the US marketplace otherwise it would turn into such a small time player that the foreign bank's corporate board 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 bank must be on the good side of the Internal Revenue Service otherwise that foreign bank will be shut out of getting US capital or customers! Part of being on the good side of the Internal revenue service is to cough up what the Internal Revenue Service says to disclose. Accordingly the foreign bank is really at the mercy of the Internal Revenue Service.meaning so are the banks' account holders. So you see, hiding behind the shadows becomes riskier and riskier. 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 complicated. Additionally, 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 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 disclose the existence of previously unreported financial accounts first.
Option 3: Soft (or quiet) disclosure. An option that some people tried is to file amended tax forms 1040X's and mail them to the IRS just think "regular" 1040X's, pay the taxes, and hope the IRS won't figure out what was going on. Doesn't this seems like a fool-proof game-plan? Perhaps one could avoid all those excessive penalties of the OVDI programs?
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 taxpayers who attempted to utilize the "soft" disclosure process.
There are other problems with "Quiet Disclosures." One massive failing is that a soft disclosure does not remedy the matter of the taxpayer's non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. As a result filing a quiet disclosure does not go far enough to remove any likelihood of criminal charges. In fact, the 1040X may --- well here's the problem with this alternative --- the quiet disclosure does nothing about 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 doubt 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 stipulations of the 2011 OVDI which capped certain penalties.
There are only two requirements. First, 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 imperative that they only talk to a experienced offshore tax law firm. The attorney-client privilege only applies when speaking to an lawyer. The Internal Revenue Service can subpoena a CPA or nearly anyone else to testify against a taxpayer.
