US resident taxpayers and US expatriates need to exercise caution when considering a claim of non-willful conduct during OVDP submissions to the IRS. The IRS has clearly communicated that it intends to make its own determination of “willful” versus “non-willful” conduct as it pertains to offshore account and asset reporting. The core issue revolves around a purposeful intent to avoid paying US taxes on offshore accounts and assets via FBAR and other IRS forms. Those who successfully claim non-willful status will achieve a substantial reduction in any remaining penalties (as low as 5%), and a release from any criminal exposure. This opportunity is historic, and the carrot being offered by the IRS is quite attractive. So what is the potential catch, and how does attorney-client privilege come into your calculations on these matters?
The catch is the IRS, and its intent to determine for themselves the source of funds in offshore accounts. The IRS has clearly communicated that offshore balances that are the result of unreported income will face intense scrutiny, and the IRS will make its own determination of willful versus non-willful conduct. If you, as a US taxpayer, blindly apply claiming non-willful status through one of the OVDP options, you still face an IRS with the ability and intent to pursue and prosecute tax avoidance. The only protection available to you is the barrier provided by attorney-client privilege. Any information you discuss with or disclose to a CPA or tax expert can be compelled by the IRS at any point in the future, and used against you in civil or criminal tax proceedings. Accounting and tax professionals cannot provide legal advice, and therefore are unable to provide informed and accurate counsel as to the potential civil or criminal liabilities you face. All of your information provided in those forums is in the open to the IRS.
Janathan Allen is an experienced and seasoned tax attorney with deep financial certification and tax expertise. As an attorney, Ms. Allen provides her clients with extensive protections via the attorney-client privilege allowing them to share information and provide a full disclosure of income and assets over the past 8 years. Only in this secure environment can a US taxpayer receive the value of a detailed financial analysis of available options and financial strategies while enjoying protection from the IRS. Only an experienced tax attorney like Janathan Allen can provide a complete analysis and informed recommendations on the IRS OVDP and which option best provides the relief you seek and the protections you will need based upon your unique circumstances.