Ovdi India Do You Know Your Options
So many
citizens got caught off guard with the recent attention the Internal Revenue Service is giving
holders of offshore bank accounts. So what to do? The last offshore
voluntary disclosure initiative (OVDI) ended on August 31, 2011. With that in mind, here are the four options currently
available to those wondering what to do.
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 extraordinary 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 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 Internal Revenue Service says to disclose. Therefore the 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 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 Internal Revenue Service? 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 complicated. Furthermore, 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 IRS 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 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 like "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?
The Internal revenue service says that these 1040X's 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.
The "soft" disclosure option is incredibly risky for several reasons.
One reason is that they do not remedy the matter 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 simply filing a soft disclosure 't go far enough to eliminate any
likelihood of criminal investigations. In fact, the 1040X may --- well
here's the terrific dilemma with this option --- it
does nothing about the failure to FBAR forms. 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.
The forth option is a
pre-emptive disclosure and subsequent negotiation of the penalties. 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 passed on August 31, 2011 was the particular standards terms of the 2011 OVDI. It was simply a pre-agreed upon penalty
structure. The IRS always welcomes voluntary disclosures.
There are two main requirements. First, the taxpayer can't already be under examination or
investigation. And second, the foreign financial accounts can't
be connected to criminal activity think money laundering or drug trafficking. Once these
qualifications are met, criminal indictments are removed from the continuum of possibilities and the case is sent to the civil
division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a guarantee of no criminal prosecution. Even though fines and penalties may be significant, they are insignificant compared to an .
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified OVDI attorneys, skilled in overseas compliance and sensitive Internal Revenue
Service negotiations.
citizens got caught off guard with the recent attention the Internal Revenue Service is giving
holders of offshore bank accounts. So what to do? The last offshore
voluntary disclosure initiative (OVDI) ended on August 31, 2011. With that in mind, here are the four options currently
available to those wondering what to do.
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 extraordinary 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 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 Internal Revenue Service says to disclose. Therefore the 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 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 Internal Revenue Service? 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 complicated. Furthermore, 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 IRS 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 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 like "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?
The Internal revenue service says that these 1040X's 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.
The "soft" disclosure option is incredibly risky for several reasons.
One reason is that they do not remedy the matter 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 simply filing a soft disclosure 't go far enough to eliminate any
likelihood of criminal investigations. In fact, the 1040X may --- well
here's the terrific dilemma with this option --- it
does nothing about the failure to FBAR forms. 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.
The forth option is a
pre-emptive disclosure and subsequent negotiation of the penalties. 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 passed on August 31, 2011 was the particular standards terms of the 2011 OVDI. It was simply a pre-agreed upon penalty
structure. The IRS always welcomes voluntary disclosures.
There are two main requirements. First, the taxpayer can't already be under examination or
investigation. And second, the foreign financial accounts can't
be connected to criminal activity think money laundering or drug trafficking. Once these
qualifications are met, criminal indictments are removed from the continuum of possibilities and the case is sent to the civil
division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a guarantee of no criminal prosecution. Even though fines and penalties may be significant, they are insignificant compared to an .
Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified OVDI attorneys, skilled in overseas compliance and sensitive Internal Revenue
Service negotiations.
