FATCA has completely changed the international financial landscape – from FBAR crackdowns to the “Panama Papers.” Recently, many people have asked “Is the IRS Offshore Voluntary Disclosure Program or OVDP the right alternative for FBAR compliance or should I/we consider the streamlined application? The central question from the perspective of the IRS is “What was the US taxpayer’s intent?” They cloak this question in a bit of murky (and potentially hazardous) terminology: “willful” conduct versus “non-willful” conduct on the part of the taxpayer. The IRS has failed to clearly define “non-willful” although they completely overhauled the Streamlined Domestic Offshore Procedures forms 14653 and 14654 and added a substantial questionnaire that asks for a complete biographical sketch including your education, financial training, investment history, travel habits, the structure of your offshore accounts and investments, and why you established them. Most importantly, you must make all of these voluntary information disclosures under penalty of perjury.
If you have offshore investments, assets, or money in a foreign account with a balance above $10,000 at any point in the past 6 years, you should give serious consideration to the IRS OVDP option. While this option does have a steeper penalty, 27.5% versus 5%, there is no “qualification” to the program, and as long as the taxpayer makes a transparent and full disclosure the IRS agrees to release them from criminal tax evasion prosecution and allow them to move forward with their life. If the taxpayer applies through the streamlined program and is rejected, or if a person fails to attempt to come into FBAR compliance at all, they face the full wrath of the IRS including criminal prosecution and jail time, as well as forfeitures that could easily exceed the present value of any assets or account balances. Why risk it?
These decisions should be reached after careful analysis. There is one more potential trap to avoid: disclosing information to anyone other than the tax attorneys at Allen Barron. An attorney is able to extend the protections of the attorney-client privilege. This absolute legal defense allows us to have an open candid conversation about all of your offshore activities. You can provide information to us and it is safe from the IRS until we choose to disclose it. If you disclosed the same information to a CPA, tax preparer, financial adviser or other non-attorney the IRS can subpoena anything: emails, texts, all file notes, all information provided by the taxpayer to the CPA or other financial professional, notes from phone calls, in other words – every piece of information you provide can be seized by the IRS.
You need advice. You need to know what makes the IRS Offshore Voluntary Disclosure Program or OVDP the right alternative for FBAR compliance. You need to be able to have those conversations under the protection of the attorney-client privilege. That is why we invite you to call for a free and substantial consultation at 866-631-3470.