We are often asked for a definition of “willful” versus “non-willful” activity by a US taxpayer as it relates to the disclosure of offshore assets, accounts and interests. The exact criteria for each option has not been clearly defined by the IRS. Is this purposeful? How might the IRS benefit by leaving the playing field covered in fog?
The difference between penalties for willful offshore conduct (27.5% to 50%) and non-willful FBAR compliance issues (5%) is a substantial number for most taxpayers. It is very tempting for a US taxpayer with offshore interests to simply make the claim that their activities and the failure to make a complete and accurate FBAR disclosure was non-willful. But is this a prudent decision?
Here is the catch: If you declare your activities were “non-willful” and apply under the Streamlined Domestic Offshore Procedures in order to claim the lowest potential penalty you risk the very real possibility that the IRS will disagree, declare your activities willful, and reject your application for a streamlined program. Now you face the full fury of the IRS, 100% penalties or $100,000 a year (whichever is higher) as well as prison time for criminal tax evasion.
Those who select the OVDP have much more concrete assurance as to how their case will be handled, and the exact amount of their exposure. This is an important, and potentially life-altering decision with substantial consequences. We invite you to contact the experienced tax attorneys at Allen Barron for a free and substantial consultation at 866-631-3470.
We can provide the protections of the attorney-client privilege which allows you to fully disclose all of your unique offshore activities, accounts and assets without fear of exposure to the IRS.
The central question in these matters comes down to a choice by each taxpayer: Is the “non-willful” designation a sound option, or is it a potential trap for US taxpayers?
Perhaps it would help to take into account the years of legislative activities required to pass FATCA, the years of work by the US Justice Department to pursue offshore banks and sovereign nations in the international courts, and the massive amount of US resources poured into the process that now exposes you and all of your assets:
The fact that the IRS is receiving direct information detailing the accounts and transactions of US taxpayers from over 170,000 institutions in more than 250 countries world wide.
Allen Barron provides a single-source tax, accounting and tax preparation and legal partner for those who face offshore tax issues.
