The Four Issues You Want To Know About Voluntary Disclosure 2012

The IRS has power to tax 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. The Internal Revenue Service offered two previous offshore voluntary disclosure initiatives. One in 2009 and the last one in 2011. The last one expired on August 31, 2011. For those citizens thinking what to do, this piece talks about their four remaining options.

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 possibility, no matter how small, that the taxpayer can get away with the crime. The disadvantages are that if caught, the penalties are severe. In both monetary cost and in emotional drain of being charged with a federal crime. 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 US customers. And in order to do so, these banks must comply with what the IRS tell them to. In order to be on the good side of the Internal revenue service is to cough up what the Internal Revenue Service says to disclose. So 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 Internal Revenue Service starts an investigation, there are no option left except…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 not as easy as you may think. 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 the expatriation is handled improperly, the IRS treats it as a non-event, meaning you are still subject to the jurisdiction of the IRS --- indefinitely. Renouncing your citizenship only gets rid of future tax liabilities, but you have to report the existence of hidden financial accounts first.

Option 3: Soft (or quiet) disclosure. An option that some taxpayers tried is to file amended tax forms 1040X's and mail them to the Internal revenue service just think "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 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 Department of Justice claims that it has also begun prosecution of citizens whose "Quiet Disclosures" were discovered by the IRS.

The "soft" disclosure option is incredibly risky for several reasons. One massive failing is that a soft disclosure does not address the matter of the taxpayer's non-compliance in FBAR filing; as a willful failure to file an FBAR is a criminal charge. As a result filing a soft disclosure 't go far enough to remove any possibility of criminal investigations. In fact, the amended return might --- well here's the terrific dilemma with this alternative --- it 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 roadmap to find you.

Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") This is the optimal solution. 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 specific standards terms of the 2011 OVDI. It was simply a pre-agreed upon penalty structure. The IRS always welcomes voluntary disclosures.

There are only two 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 wondering what the appropriate course of action is, it is imperative that they only speak to a experienced foreign tax lawyer. The attorney-client privilege only applies when speaking to an attorney. The Internal Revenue Service can subpoena nearly anyone else to testify against a taxpayer.

Feel this compisition about Voluntary Disclosure 2012- is clarifying? Find further news with reference to Voluntary Disclosure 2012 from an specialist that knows the Internal Revenue Service.