The past few months have brought several historic and dramatic developments in respect to offshore financial reporting, the IRS, and questions of whether US taxpayers have shown “willful” or “non-willful” conduct as it relates to the reporting of foreign assets and income via the FBAR and other IRS Forms. What does a US taxpayer or US expatriate with foreign assets or financial accounts need to know, and how does the attorney-client privilege come into play in this discussion?
The IRS has worked effectively with the US Justice Department to pursue international financial institutions who have illegally assisted US taxpayers in tax avoidance strategies. One of the principal threats the IRS has in its arsenal is criminal tax avoidance charges – the ability to send one to jail for tax evasion. The Offshore Voluntary Disclosure Program (OVDP) and subsequent Streamlined Domestic Offshore Procedures address this issue directly, and the core issue is the behavior of the US taxpayer: Willful or Non-Willful? Did the taxpayer willfully take action to avoid reporting income and assets offshore in an effort to avoid paying US taxes? Or was the unreported or under-reported information contained within the taxpayers past 8 years of FBARs and other forms due to “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law”.
The recent streamlined domestic offshore procedures leave a lot of room for the IRS to come back and make its own determination on the issue of “willful” versus “non-willful” conduct. The IRS has clearly indicated that simply claiming non-willful status on OVDP (and streamlined) applications will not release the US taxpayer from potential civil and criminal penalties. The IRS has indicated that it will be looking into the source of funds in offshore accounts. If the source of offshore balances is unreported income, the taxpayer could face a stiff challenge. It is also important to note:
You Have Until August 15 of This Year to Come Into Compliance with the IRS
There are several options for making a disclosure to the IRS in the next 5 weeks. You will need to review a complex series of options based upon your unique situation to determine which component of the OVDP to apply within, and how to best position your assets (and associated reporting) for the future. You should exercise extreme caution when it comes to who you select to share your information with. As a tax attorney, Janathan Allen provides her clients with the extensive protections of the attorney-client privilege. You will need to be able to safely disclose critical and comprehensive information about your offshore income and assets to be able to determine your best option(s). Anything you disclose to a CPA or “tax expert” can be compelled from them at any point in the future by the IRS, and used against you in an audit, as well as civil or criminal proceedings. Attorney-client privilege allows you to share all of your information with attorney Allen in a safe, protected environment. As a seasoned and experienced tax attorney she can guide you through the various programs and options and help you to clearly understand your risks and the gains associated with each option. She can also protect you and your financial interests and provide a strong legal barrier to the IRS, protection that will serve you in the next few weeks, and in the months and years to come.
