Update 2017: Read about the current Disclosure Programs here.
The new IRS 2012 Offshore Voluntary Disclosure Program has been announced. So what to do?
The first option available is to do nothing. The benefit is that it costs zero to do, and there is certainly a possibility that the taxpayer can get away with the non-disclosure. The disadvantages are that if discovered, the penalties are harsh.
The second option is to renounce citizenship and depart the country — as this is the only way to escape the taxing jurisdiction of the IRS. But be warned — this only will dodge future tax debts and conformity problems. The only technique to properly relinquish is to fundamentally come clean about all overseas bank assets and actually forfeit an expatriation tax.
The third option is Soft (or quiet) disclosure. One option is to file amended returns, this time including previously unreported income – simply filing the returns as if it were simply forgotten income. Sounds think a good strategy, right? Perhaps one could avoid all those excessive penalties?
There may be serious problems with this alternative. One major drawback is that the Department of Justice states that it has begun criminal proceeding against people who attempted to utilize the "soft" disclosure process.
The "soft" disclosure option is incredibly risky for several reasons. One reason is that they do not remedy the issue of the taxpayer’s non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. So simply filing a quiet disclosure does not go far enough to eradicate any possibility of criminal investigations. In fact, the 1040X may — well here's the massive problem with this option — it does nothing concerning the failure to the FBAR. There are still criminal and civil charges that may be pending for failing to file an FBAR, but simply give the IRS a roadmap to find you.
Option 4: Utilize a voluntary disclosure program. If getting sleep at night and not worrying about going to prison is chief concern, there can be no question that this is the best option. There are only 2 requirements. First, the taxpayer can not be under examination. Also, the source of the funds in the foreign bank accounts can not be from an illegal source. Like drug trafficking or money laundering. The possibility for lower FBAR penalties is possible based on facts of your case.
If you have unreported accounts and aren't sure what to do, contact us. We can help. Call us at 888-727-8796 or email info@irsmedic.com. Your information will be kept confidential.
