The Internal Revenue Service demands to know where all the citizens foreign accounts are located — it is a crime to keep these foreign bank account secret if they are over $10,000.00 in value. The IRS offered a third 2012 offshore voluntary disclosure initiative (OVDI). The first two were in 2009 and 2011. For those people wondering what to do, this article talks about their 4 remaining options under the 2012 OVDI.

The first option is to do nothing except hope and pray. The advantage is that it costs nothing to do, and there is certainly a likelihood of greater than zero, no matter how slight, that the taxpayer can get away with the crime. The downside that is if discovered, there is an extraordinary emotional strain for anybody who become a criminal defendant. Even if acquitted, the entire process will be the most arduous time of someone\’s life. Even if found not guilty, a criminal trial is still incredibly costly.

Here’s the thing – every global banking and financial institution must be in the American marketplace or it would become such a small time player that the foreign bank’s corporate board would revolt. Despite everything you may have heard, the American is still by far the largest economy in the world and every global bank must be on the good side of the IRS – otherwise that bank will be shut out of getting US capital or customers! In order to be on the good side of the IRS is to disclose what the IRS says to cough up. Accordingly the bank is really at the mercy of the IRS…meaning so are the banks\’ account holders. So you see, hiding behind the shadows becomes a more dangerous and dangerous. And once the Internal Revenue Service starts seeking a criminal indictment, there are no option left except…pay outrageous taxes and the highest penalties and face the significant possibility of real jail time.

The second option is to renounce citizenship and leave the country — as there is no other way to escape the power of the IRS. But be warned — this only will dodge future tax debts and submission problems. The only way to correctly abandon is to essentially come clean about all overseas bank financial records and actually forfeit an expatriation excise (in many ways it was easier to leave Soviet Block country than to leave the USA completely intact with your wealth.)

Option 3: Soft (or quiet) disclosure. One option is to file amended returns, this time including previously unreported income – simply filing the returns as if it were simply forgotten income. Doesn\’t this seems like a fool-proof game-plan? Perhaps one could avoid all those excessive penalties of the OVDI programs?

The Internal revenue service says that these 1040X\’s are “red flags.” Even though the tax returns are amended and back taxes paid, the Internal revenue service tells says that foreign account holders will still face penalties and criminal charges. In addition to charging and prosecuting people with undeclared foreign income, the Department of Justice claims that it has also begun prosecution of taxpayers whose “Quiet Disclosures” were discovered by the Internal revenue service.

The \”soft\” disclosure option is incredibly risky for several reasons. One reason is that a soft disclosure does not remedy the issue of the taxpayer’s non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. So simply filing a soft disclosure ‘t go far enough to eradicate any possibility of criminal investigations. In fact, the amended return may — well here\’s the problem with this alternative — the soft disclosure does nothing concerning the failure to FBAR forms. There are still criminal and civil investigations that may be pending for failing to file an FBAR, but simply give the IRS a very handy to locate you.

Option 4: Pre-emptive Disclosure and Negotiation (” Offshore Voluntary Disclosure Initiative”) under the 2012 OVDI extension.The Internal revenue service always welcomes voluntary disclosures and there are only two requirements.

There are 2 main requirements. First, the taxpayer cannot already be under examination or investigation. And next, the foreign assets can\’t be connected to any criminal activity – think currency laundering or drug trafficking. Once these qualifications are satisfied, any criminal crimes come off the table and the taxpayer\’s is referred to the civil division for assessment of taxes, interest and penalties. A successful OVDI offers reduced penalties and a guarantee of absolutely no criminal charges. Although fines and penalties may be substantial, they are meaningless compared to even a short prison sentence.

Attorney Anthony E. Parent, is the managing partner of Parent & Parent LLP, a boutique tax firm that specializing in OVDI extension disclosures for their clientele worldwide, and is the founder a IRSmedic, a website dedicated to helping taxpayers get the best legal representation possible.

Attorney Anthony E. Parent, is the managing partner of Parent & Parent LLP, a boutique tax firm that specializing in http://www.irsmedic.com/2012/03/01/ovdi-extension disclosures for their clientele worldwide, and is the founder a IRSmedic, a website dedicated to helping taxpayers get the best legal representation possible.

Author Bio: Attorney Anthony E. Parent, is the managing partner of Parent & Parent LLP, a boutique tax firm that specializing in OVDI extension disclosures for their clientele worldwide, and is the founder a IRSmedic, a website dedicated to helping taxpayers get the best legal representation possible.

Category: Advice
Keywords: OVDI, OVDP, extension, FBAR, IRS, voluntary disclosure, India, HSBC, Wegelin, UBS