California Attorney for IRS Voluntary Disclosure Practice
The IRS conducts many audits every year. Once you have been selected for federal or state audit, your options to get yourself back into compliance become extremely limited, and you could end up facing severe civil and even criminal tax penalties and or criminal tax prosecution, especially if your conduct was willful concerning any noncompliance with income tax or foreign information reporting. However, if you act to voluntarily disclose your mistakes or intentional acts of evasion before an audit or criminal tax investigation into your conduct is initiated, you will have a nearly guaranteed chance of being successfully brought back into compliance without being criminally prosecuted for tax crimes if you follow our advice to the letter.
At the Tax Law Offices of David W. Klasing, our tax attorneys have decades of experience working to help clients whose tax returns were false or misleading to correct these issues through the various voluntary disclosure programs offered by the IRS and the state of California. We will work to bring you back into tax compliance without having the harshest fines and penalties levied against you. Read below to learn how our California & IRS Voluntary Disclosure Practice Attorneys and CPAs can help you. To schedule a consultation, contact our office today at (800) 681-1295.
What Are the Various Disclosure Programs Offered by the IRS if I Filed one or more False or Misleading Return?
There are several different voluntary disclosure programs, and which one applies best to your situation will depend on the specifics of your case. You should always consult with a skilled tax lawyer like those at the Tax Law Offices of David W. Klasing before filing for voluntary disclosure.
We can advise you about which program you should enter into and whether you could open yourself up to further criminal liability by your disclosures. Remember that you typically must act to take advantage of these programs before a audit or criminal tax investigation begins, at which point you will become ineligible.
One option is a process commonly known as a quiet disclosure. This process, which is not any sort of official IRS program, involves simply amending your returns and refiling. Aside from what you owe, you will also have to pay interest and any penalties that would have been self-assessed. However, our attorneys usually recommend that you go through one of the official programs rather than this unofficial route.
Unlike the voluntary and streamlined disclosure programs, it does not prevent or necessarily even lessen the chances of the IRS imposing heavy penalties, including criminal tax penalties, if the conduct is found to have been willful. Only occasionally might we recommend this route, such as if the mistakes on your return were minor and non-willful.
Delinquent International Information Reporting Submission Procedures Program
If you have dutifully reported all required foreign taxable income from your U.S. tax returns but inadvertently failed to file FBARS or other required offshore information returns, you can get back into compliance under this program without penalties if you have a valid reasonable cause the noncompliance.
Voluntary Disclosure Programs
There has been a long-standing policy within the IRS that taxpayers who come forward and voluntarily disclose false or misleading information on their previous domestic or international tax returns, and pay what they owe plus interest and fines, will be shielded from criminal liability.
In the early 2010s, the IRS began a program that eventually became known as the Offshore Voluntary Disclosure Program (OVDP). This program allowed taxpayers who failed to file the required FBAR reports in previous years, oftentimes also failing to report taxable offshore income and other required offshore information reporting, to self-disclose the information that should have been reported, in exchange for limiting the potential civil penalties they could face and essentially illuminating the risk of criminal tax prosecution. This program was an enormous success but was canceled in 2018 due to declining taxpayer participation.
However, you can now make both foreign and domestic disclosures through the IRS’s new Voluntary Disclosure Practice (VDP). This program is available for domestic and offshore willful conduct. However, it is usually considered the program of last resort among the options mentioned in this article, as the civil penalties you will be required to pay can be steep. Aside from owing taxes and interest on the past six years of tax deficiencies, you will also have to pay a civil fraud penalty of 75% on the highest tax deficiency year out of the previous 6. If you failed to file FBARS for offshore accounts, an additional penalty of 50% of the highest daily aggregate balance of the aggregate of the unreported offshore accounts throughout the six year FBAR disclosure period, or $100,000, whichever is greater, will be assessed.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed domestic or international income tax and information returns coupled with affirmative evasion of payment) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before 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 voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs 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!
In most cases, where your conduct was non willful, a streamlined disclosure is going to be a better financial option for you than the VDP. However, one significant difference between the streamlined disclosure program and the VDP is that for streamline disclosure, you must sign a form indicating that your conduct was non-willful. If you falsely certify non-willfulness, you could be subject to further penalties, including criminal tax charges.
As such, those who willfully committed tax and information reporting fraud, as opposed to those who made honest mistakes, should apply for the VDP instead of a streamlined voluntary disclosure. Again, however, no decision about what program to utilize should be made without first consulting with an experienced International Tax Attorney & CPAs like those at the Tax Law Offices of David W. Klasing.
If accepted into the streamlined voluntary disclosure program, you will be required to submit a large amount of paperwork, including three years of amended personal income tax returns that report the previously omitted offshore taxable income, six years of FBARS and 3 years of any other required foreign information reporting which our skilled Tax Attorneys and CPAs can help you prepare. You will be effectively shielded from criminal prosecution if your conduct was non-willful.
Furthermore, for non-residents, you will also avoid the “offshore penalty” entirely. For U.S. tax residents, you will have to pay 5% on the highest aggregate amount in the undisclosed offshore accounts over the course of the six years required under the program measured as of December 31st. You also may be required to pay certain other fines and fees to be brought back into compliance. Overall, however, the streamlined disclosure program usually offers the least expensive path back into compliance if you are eligible where you have unreported offshore taxable income and undisclosed foreign financial accounts.
U.S. Taxpayers living outside the U.S. may not have to pay the 5% penalty discussed above if they qualify for a streamlined voluntary disclosure.
See our 2011 OVDI Q and A Library
See our FBAR Compliance and Disclosure Q and A Library
See our Foreign Audit Q and A Library
If You Are Interested in a Voluntary Disclosure Program to Bring You Back into Tax Compliance, Call our Skilled Tax Attorneys Today
If you get out ahead of the curve by disclosing your mistakes to the IRS before they come after you with an audit or criminal tax investigation, there is a good chance you will avoid the most severe potential penalties you could face. At the Tax Law Offices of David W. Klasing, our experienced tax attorneys can help you figure out which program gives you the best chance of being brought back into tax compliance with minimal trouble. Then we can protect your rights through the process. To schedule a consultation, call our firm today at (800) 681-1295.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords, and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here
Questions and Answers about OVDP:
- What are the Eligibiliy Requirements for Streamlined Disclosure?
- What is Transitional Treatment Option to 2014 OVDI Program?
- Streamlined Program 2014 Changes Regarding Foreign Accounts
- 2014 Changes to Tax Laws for Offshore Accounts and Assets
- Changes to IRS Voluntary Disclosure from 2012 and 2014 OVDP