We have been at the forefront of the IRS crackdown on offshore bank accounts, foreign investments and corporate ownership and the requirement for US taxpayers to come into compliance with FBAR reporting and associated IRS offshore voluntary disclosures. For those who have decided to file IRS voluntary offshore disclosures under the Streamlined Domestic Offshore Procedures based upon “non-willful” behavior, and for those who have yet to make a voluntary disclosure, a disturbing quote from Caroline Ciraolo, the acting Assistant Attorney General at the Department of Justice’s tax division in the past few days provided a sobering insight:
“After seven years of voluntary disclosure programs, nearly 200 criminal prosecutions, and the increased assessment and suits to collect FBAR penalties, a taxpayer’s claims of ignorance or lack of willfulness in failing to comply with disclosure and reporting obligations are not well-received. Similarly, we are very interested in taxpayers who filed tax returns and FBARs pursuant to the Streamlined filing procedures, or the Delinquent International Information Return or FBAR submission procedures, who falsely claimed either to have engaged in non-willful conduct or to have acted with reasonable cause.“
I have counseled many offshore investors and account holders about the issue of “willful” versus “non-willful” behavior on the part of a US taxpayer with offshore interests. Obviously, if you can make a claim of “non-willful” conduct and reduce penalties from 100% (for non-compliance), or 27.5% to 50% (OVDP Disclosure) to a seemingly minimal 5% (Streamlined application) the potential savings could be six figures, or higher.
The challenge is, and will always be, that the IRS is the party who gets to make the decision about what is “willful” or “non-willful.” Many of those I have counseled against filing a streamlined application left my office in search of another professional who would tell them what they wanted to hear and help them to file a streamlined application. The risk simply isn’t worth it. It wasn’t then, and it certainly isn’t today.
If a US taxpayer has filed under the streamlined application process, and the IRS rejects their claim of “non-willful” behavior there is no fall back position. The IRS will be free to levy the highest penalties possible (100% of the highest accrued account balance) or $100,000 per violation which ever is higher. They have also announced their intention to pursue criminal prosecution.
If you have offshore bank accounts, foreign investments or have any interest in a foreign trust or corporation, you need to take heed of Ms. Ciraolo’s comments and contact us immediately for a free and substantive consultation at 866-631-3470. Learn about the important protections of the attorney-client privilege, and the steps you should take to come into compliance with the IRS voluntary offshore disclosures.