Knowing These Four Options About OVDI FAQ Will Save Your

Knowing These Four Options About OVDI FAQ Will Save Your Neck

If you are an American taxpayer with an offshore accounts that you thought were secret, you must bring it into compliance - that is file missing FBARs and include any missing income on amended tax returns. 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.

Option One: Do nothing. You could do nothing and hope that the IRS does not find out the account. Perhaps your foreign foreign bank account is at a foreign bank that you believe to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-American passport. Well, it used to be that a foreign bank account's true owner could be kept anonymous. However, now, the IRS has vastly many more tools than it ever did previously to find hidden accounts.


This is an important caveat. The chances are that the IRS does not discover undisclosed accounts gets smaller and smaller. Why? Because in order to compete for American customer and capital, foreign banks are coerced into complying with the IRS. That's right --- foreign banks take their marking orders from the IRS as well. So if the IRS wants information on American holders of foreign accounts, the IRS will get that information. The IRS will also run names of other individuals it suspects of being US citizens but who opened their accounts with foreign passports. The Internal Revenue Service has incredible investigative powers --- powers it never had before.

The next option is to renounce nationality and leave the country --- as there is no other way to escape the power of the IRS. But be warned --- this only works to dodge upcoming tax debts and compliance troubles. The only way to correctly forsake is to fundamentally come clean about all foreign foreign bank accounts and actually pay an expatriation tax (in many ways it was easier to leave Soviet Block country than to leave the USA completely intact with your wealth.)

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. Doesn't this seems think a fool-proof game-plan? Perhaps one could avoid all those excessive penalties of the OVDI programs?

The IRS says that these amended returns are "red flags." Even though the tax returns are amended and back taxes paid, the IRS tells says that foreign account holders will still face penalties and criminal charges. In addition to charging and prosecuting people with undeclared foreign income, the DOJ claims that it has also begun prosecution of people whose "Quiet Disclosures" were discovered by the Internal revenue service.

The "soft" disclosure option is incredibly risky for several reasons. One massive failing is that a soft disclosure does not address 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. So filing a quiet disclosure 't go far enough to eliminate any likelihood of criminal investigations. In fact, the 1040X may --- well here's the massive problem with this option --- it 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 roadmap to find you.

The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. If getting sleep at night and not worrying about going to prison is chief importance, there can be no question that this alternative 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 deadline that was missed was the particular terms of the 2011 OVDI which capped certain penalties.

There are only 2 requirements. First, the taxpayer can not be under audit. In addition, 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 speak to a qualified offshore tax law firm. The attorney-client privilege only applies in communications to an attorney. The Internal Revenue Service can subpoena nearly anyone else to give evidence against a taxpayer.

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