What There Is To Know About Offshore Accounts Do You

What There Is To Know About Offshore Accounts Do You Know

So many taxpayers 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. These are the four options still available.

The first option is to do nothing except hope and pray. The advantage is that it costs nothing to do, and there is certainly a possibility, no matter how slight, that the taxpayer can get away with the crime. The downside that is if learned, there is an unbelievable 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 institution must be in the American market or it would become such a small time player that the bank's shareholders would revolt. Despite everything you may have heard, the American 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 US capital or customers! Part of being on the good side of the IRS is to cough up what the Internal Revenue Service says to disclose. Consequently the foreign 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 is only one option left-pay 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 American citizen. The process is complicated. Furthermore, 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. Expatriation may make sense to avoid future tax liabilities , but you have to report the existence of undisclosed financial accounts first.

This third way is to simply file amended returns and not explicitedly tell the Internal Revenue Service that you are seeking to voluntarily disclose. 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 IRS a roadmap to charge you criminally, and if caught, you are see high penalties and a possibility of criminal charges.

The Department of Justice states that it has begun prosecutions on people who have attempted soft disclosures. So this option has some serious problems

The "soft" disclosure option is incredibly risky for several reasons. One reason is that a soft disclosure does not remedy the problem 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 't go far enough to eradicate any likelihood of criminal charges. In fact, the 1040X may --- well here's the terrific dilemma with this option --- it 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 IRS a very handy to locate 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 file under the 2011 initiative has passed, it is not too late. The only thing that passed on August 31, 2011 was the particular standards terms of the 2011 OVDI. The 2011 OVDI 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 examination or criminal investigation. And next, the foreign assets cannot be connected to criminal activity - think currency laundering or drug trafficking. Once these qualifications are satisfied, criminal crimes come off the table and the taxpayer's is sent to the civil division for assessment of taxes, interest and penalties. A successful OVDI offers reduced penalties and a guarantee of no criminal prosecution. Although fines and penalties may be considerable, that's just a bill, they are insignificant compared to an .

If someone is still wondering what the suitable course of action is, it is imperative that they only talk to a qualified offshore tax law firm. 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.

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