FATCA, OVDP, and Streamlined case studies

Offshore disclosures and FBAR penalties are a focus of the IRS. The law, procedures and actual outcomes are constantly evolving — and sometimes the IRS operates inconsistently. To help provide some guideposts, I have selected the following three case studies as examples of typical issues and our methods in finding success.


Taxpayer finds no need to wipe out entire fortune for piece of mind

"Cory," a US expat living in Malta, received a FATCA letter from a Swiss bank in 2014. Frantic, he consulted with a Washington, DC based tax law firm and they told him his only choice was to enter into the full Offshore Voluntary Disclosure Program (OVDP) and agree to the standard 27.5% offshore penalty. The thing is, had he followed their advice the back taxes and penalties would have wiped out his entire fortune of $15 million dollars.


Cory visited us for a second opinion. On the surface, it appeared as if Cory was engaging in tax evasion, but as we dug deeper we discovered he actually had very good reasons for not reporting his offshore accounts and income. We agreed that Cory should "opt-out" and not agree to the massive offshore penalty. While we were preparing his submission, the IRS announced the favorable Streamlined disclosure procedures. This put Cory in even a better position. His penalties would be dramatically reduced to essentially nothing. Additionally, we were able to find hidden favorable tax treatments.


Instead of a bill that would have wiped him out, Cory came 100% clean, has 100% access to his money, and only paid a total of $900,000 in back taxes and penalties to the IRS.


Opt-out success where others feared to tread

Belinda had unreported bank accounts in Denmark, where she lived for half of the year. She never hid the fact that she worked abroad from anyone, and eventually learned that she had an FBAR problem. She talked with us in 2012 and we recommend an opt-out of the full OVDP program; she decided instead to hire a New York tax attorney that her CPA recommended.


In 2014, we heard from Belinda again. She said she couldn't believe it, but her attorney told her she would have to pay $350,000 in an offshore penalty. She felt she was being bullied and didn't think this was fair, so she hired us to conduct the FBAR opt-out audit. We first fixed the numerous errors in the returns that resulted in taxes that were way too high. Even better, were able to demonstrate that Belinda's conduct was so benign that the IRS agreed to assess absolutely no FBAR penalty at all.


Belinda simply received an FBAR warning letter after paying a rather modest tax bill.


Our streamlined protocol might have saved a life

One of the major advantageous to our offshore practice is that like a medical clinic, we see the similar issues again and again. This helps us develop protocols so that our clients benefit from every bit of piece of information we learn from our other clients' cases. Case in point: Our streamlined process. We've learned an unofficial method of how to check to see if a Streamlined disclosure candidate has a pending criminal investigation. You may think, why would a streamlined candidate need protection from criminal investigations? After all, aren't streamlined candidates, by their definition, those who did not engage in criminal conduct? You would think so, but that's not how the criminal procedure works. Innocent people are convicted all the time of tax crimes, either by a jury, or more common, by agreeing to a plea because they can not financially or emotionally afford the costs of a trial.


Enter "Raj," who had $3 million of India time deposits.  A recent immigrant to the US, he, like millions of other H1-B Visa and Green card holders had no idea that his worldwide income was taxable. He certainly would not risk his great IT career he had in the US to avoid a few thousand dollar in taxes. As soon as Raj hired us, we initiated our Streamlined investigation protocol.


This was important because it would take nine months to get all of Raj's tax returns and FBAR completed (he had to go back to India for some documents, and was missing many records) and nine months could make a lot of difference in a criminal investigation. Four weeks after we followed our protocol, we got a call from a US Department of Justice attorney. He said that yes, Raj was under criminal investigation — one that just started. After a few phone calls —  and here's the key — before the US DOJ invested many resources, we were able to convince the government's attorney not to proceed with a criminal investigation. He remarked he had a lot more leads to get to, and it sounded like Raj "was doing the right thing." With that we submitted Raj's Streamlined disclosure and he has been resting easy ever since.


Had we not performed out protocol, it is very likely that Raj's life would be very much different. If recommended for an indictment there is a greater than 90% chance of indictment. And if an indictment is returned, there is an over 90% chance of conviction either by jury or plea. Even if Raj was ultimately acquitted, the criminal process is punishment in of itself.


If you have an offshore account issue that you're concerned about, contact us. We can help. Call us at 888-727-8796 or email info@irsmedic.com.


Names and certain details have been changed to  protect our clients' privacy. Any similarity to an actual person is purely coincidental.


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