The IRS requires that all American citizens declare the money they earned as income on their taxes. It does not matter where you are or how you earned your money. Even Americans who live in other countries with their money and investments held in foreign bank & financial institutions must declare any income earned offshore and supply all required information reporting. Failure to disclose information about your foreign bank & financial accounts and report all income earned offshore could land you in hot water with the IRS and the United States government.
Depending on the amount of tax liability in dispute, people who fail to disclose information about their foreign bank & financial accounts can face steep penalties. These penalties may include heavy fines and even criminal tax prosecution if your actions were willful. However, to encourage people to come forward about their willful failure to report offshore income generating assets, the government offers an Offshore Voluntary Disclosure Program to provide a way to come into compliance without facing criminal tax prosecution. Under this program, the government will impose lesser penalties than would apply without the program and forego criminal tax prosecution. Opting out of the program could open you up to the harshest civil penalties and potentially to criminal tax prosecution.
Call our International Tax Attorneys and CPAs for help with coming back into offshore income tax and information reporting compliance. Call The Tax Law Offices of David W. Klasing at (800) 681-1295 to arrange a legal consultation with our team.
Consequences of Opting Out
By entering the Offshore Voluntary Disclosure Program, you could partially mitigate the applicable civil penalties for willful nondisclosures and criminal tax and offshore information reporting prosecution. Under the program, you will cooperate with U.S. authorities and work to determine how much tax penalties and interest you owe and begin paying that money back. The government will also choose to forego offshore criminal tax and information reporting prosecution. However, opting out of the program opens you up to these penalties again. Whether you remain in the program or opt out is a discussion you need to have with your International Tax Attorney as a wrong decision could be catastrophic to your net worth and your liberty. Our California Tax Lawyers are here to help you.
Certain cases may carry a higher risk of criminal prosecution, especially if the government finds your nondisclosures were willful.
The United States Court of Appeals for the Fifth Circuit held in United States v. Horowitz that a couple who opted out of an Offshore Voluntary Disclosure were subject to the willful FBAR penalties. Additionally, the court explained that since the couple’s actions were deemed willful, they may also be subject to criminal prosecution.
If you are considering opting out of on Offshore Voluntary Disclosure, please get in touch with one of our California tax attorneys. We can discuss your case and figure out what decision is best for you.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
Questions and Answers About Foreign Tax Audits
- Does the Fifth Amendment apply to foreign accounts?
- How is evidence cultivated from foreign sources?
- How is tax loss determined?
- How might an FBAR audit be resolved?
- Is a penalty assessment ripe for judicial review?
- Overview of an administrative criminal investigation
- What is the process of an FBAR referral?
- Statute of Limitations raised during a FBAR audit?
- Precautions to be taken in the pre-audit phase
- Recent international tax and reporting prosecutions
- Foreign account, entity and investment prosecution
- Who collects restitution and penalties?
- International tax investigations are an IRS high priority
Questions and Answers about FBAR Compliance and Disclosure
- Potential charges for not participating in the 2014 OVDP
- How many tax returns will I amend for my FBAR filing?
- FBAR Voluntary Disclosure program end
- Can I make a voluntary disclosure after the deadline?
- Can I use IRS Voluntary Disclosure if I Can’t Pay?
- Potential reporting requirements and civil penalties
- What Happens if You Don’t Disclose Foreign Accounts
- Criminal charges if you refuse voluntary disclosure
- Characteristics of FBAR voluntary disclosures
- What is required to make a valid voluntary disclosure?
- 2012 Offshore Voluntary Disclosure Initiative Objectives
- What is an FBAR?
- Filed amended returns without making a Voluntary Disclosure
- Undisclosed foreign accounts: What exchange rate to use
- Why did the IRS announce the 2012 OVDI at this time?
- Should I consider making an offshore voluntary disclosure?
- Why to consider making a Voluntary Disclosure
- 2012 OVDI program vs. the voluntary disclosure practice
- Foreign bank account asset reporting/filing requirements
