Financial Resource

Article by Kevin Landau

The Internal Revenue Service has power to impose a tax on income from around the globe. The IRS has universal jurisdiction to tax income anywhere it is earned — even it was earned on the moon! Not only that, it is a crime not to tell the Internal Revenue Service about foreign accounts if their value exceeds $ 10,000.00 by filing an FBAR form every June. For those people in non-compliance, the IRS ran two offshore voluntary disclosure initiatives (OVDI). The last one expired on August 31, 2011. For those people thinking what to do, this article talks about their 4 remaining options.

Option One: Stick your head in the sand and pray that 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 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 actual owner could be kept anonymous. However, now, the IRS has vastly many more tools than it ever did previously to find hidden accounts.

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 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. In order to be on the good side of the Internal revenue service is to disclose what the IRS says to cough up. Therefore the bank is really at the mercy of the Internal Revenue Service….meaning so are the banks’ foreign account holders. So you see, hiding becomes riskier and riskier. And once the IRS 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.

The next option is to renounce nationality and leave the country — as there is no other way to escape the power of the Internal Revenue Service. But be warned — this only works to dodge future tax debts and conformity problems. The only method to correctly forsake is to essentially come clean about all offshore bank accounts and actually pay an expatriation excise (in many ways it was easier to leave Soviet Block country than to leave the USA completely intact with your wealth.)

The third option is to quietly filed amended 1040X’s and not mention to the IRS that you are seeking to come clean. This is known as a “quiet” or “soft” disclosure. The advantage is that there is little upfront cost to this. But the disadvantages are that you may give the IRS a very handy clue to charge you criminally, and if you are 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 they do not remedy the problem of the taxpayer’s non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. So simply filing a quiet disclosure does not go far enough to eradicate any possibility of criminal charges. In fact, the 1040X might — well here’s the massive problem with this option — the quiet disclosure does nothing about 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.

Option 4: Pre-emptive Disclosure and Negotiation (” Offshore Voluntary Disclosure Initiative”) If getting sleep at night and not worrying about going to prison 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 deadline that was missed was the particular stipulations of the 2011 OVDI which capped certain penalties.

There are 2 main requirements. First, the taxpayer can’t already be under audit or investigation. And next, the foreign financial accounts cannot be connected to any criminal activity — like currency laundering or drug trafficking. Once these prerequisites 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 successful OVDI offers reduced penalties and a guarantee of absolutely no criminal charges. Although fines and penalties may be noteworthy, they are insignificant compared to an .

Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified Offshore tax attorneys, experienced in offshore compliance and delicate Internal Revenue Service negotiations.

Get added from a real authority that has found out the law about OVDI Extension-. Do not tolerate assistance in relation to OVDI Extension- from somebody who hasn’t studied tax law.

Tags: american passport, hidden accounts, internal revenue service