Voluntary Disclosure Program: You Must File Before the IRS Contacts You
Written by admin on July 1st, 2011Article by Kevin Thorn
The deadline to apply to the IRS Voluntary Disclosure Program now over; however U.S. taxpayers still can file a voluntary disclosure under the IRS normal procedures.
In 2009, the IRS and U.S. Department of Justice began its highly publicized investigation into Swiss bank UBS AG and U.S. accountholders who hid these assets from the U.S. Government. However, the investigation did not end with UBS. The IRS made it clear that offshore tax evasion is still a top enforcement priority. The Department of Justice has gone after taxpayers regardless of the amount-even taxpayers with assets of ,000 or less in offshore accounts.
U.S. taxpayers with offshore assets and accounts are legally bound to disclose these interests to the U.S. government on their Form 1040, U.S. Individual Tax Returns, and file a corresponding Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). If IRS agents uncover that a taxpayer has not reported an interest in an offshore account or income accruing on such accounts during the course of an audit, the IRS may impose excessive penalties including the greater of 0,000 or 50% of the offshore account balance for willful failure to file an FBAR for each account. These penalties, compounded with interest and fraud penalties, can essentially wipe out the taxpayers foreign assets. In addition, taxpayers could be vulnerable to criminal prosecution and jail time for tax evasion.
The IRS announced in March of 2009 the creation of the IRS Voluntary Disclosure Program to motivate taxpayers to come forward and disclose their offshore accounts in exchange for lesser fines and the promise not to refer the case for criminal prosecution. As an outcome of the pressure on UBS and other offshore banks, thousands of U.S. taxpayers with previously undisclosed offshore accounts took advantage of the Voluntary Disclosure Program and applied before the October 15, 2009 drop dead date.
Although it may be too late to apply to the IRS Voluntary Disclosure Program, there is still time to file a voluntary disclosure under the IRS regular guidelines. There are a many positive outcomes to filing a voluntary disclosure as it is far better to disclose to the IRS than to have the IRS discover you. Almost identical with the Voluntary Disclosure Program, a traditional voluntary disclosure also allows taxpayers with previously undisclosed foreign accounts with a way out-potentially dodging the most severe civil fines and criminal prosecution.
Furthermore, those U.S. taxpayers with undisclosed offshore accounts should be aware the voluntary disclosure process is complicated and sensitive. U.S. taxpayers are encouraged to contact a tax attorney who is skilled at resolving disputes with the IRS as soon as possible to determine whether or not to file a voluntary disclosure with the IRS.
For example, if a U.S. taxpayer has already been investigated and contacted by the IRS, it may be too late to file a disclosure. Therefore, time plays a significant factor as the IRS continues its pursuit of undisclosed offshore account holders. The window of opportunity is closing on the ability to receive the reduced penalties and possible incarceration for those who file. Seeking the advice of proper counsel truly is in their best interest.
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