Is It Willfulness, Recklessness, or Attorney Scare Tactics?
When U.S. taxpayers do not properly report their foreign accounts, assets, investments, or income to the IRS, they may become subject to fines and penalties. But often, taxpayers will qualify for one of the offshore disclosure/amnesty programs, which will reduce and sometimes eliminate any fines and penalties. When it comes to offshore non-compliance, most taxpayers are non-willful, with no risk of criminal enforcement or incarceration. While some taxpayers commit willful and reckless acts when it comes to offshore non-compliance, many non-willful taxpayers get goaded into believing that their situation is much worse than it is. This is driven by ‘free FBAR consultations’ or other fear-mongering tactics. Let’s take a quick look at how taxpayers can protect themselves when researching online.
Willfulness is Not Common
In general, taxpayers are non-willful when it comes to offshore compliance. Most of the time, taxpayers who missed reporting foreign accounts, assets, investments, or income were simply unaware they were required to report their foreign money, or they misunderstood the reporting requirements. If the taxpayer did not report this information because they made a mistake or had a misunderstanding, this is generally going to be considered a non-willful situation, and taxpayers can utilize one of the non-willful disclosure programs, such as the streamlined procedures, to safely get back in compliance.
Recklessness is NOT the Same as Non-Willfulness
What makes offshore non-compliance more complicated than it needs to be is that the term ‘willful’ is not limited to intentional acts. Rather, if a taxpayer acts with reckless disregard or willful blindness, this also gets bumped up to the willfulness category in which the taxpayer may become subject to willfulness fines and penalties. Moreover, some unethical fear-mongering tax attorneys and CPAs/EA lead taxpayers into believing that if they were negligent, the IRS can automatically bump this up to recklessness so that a non-willful violation becomes willful, but this is not the case. The IRS still has the initial burden when it comes to willfulness — and this would include recklessness when the IRS seeks to pursue willful violations against the taxpayer.
Scare Tactics, Free Consultations, and AI Slop
It is important to keep in mind that nothing in life is free, and that includes ‘free FBAR consultations.’ Most of the time, a free consultation is little more than a scare pitch couched in an initial fact-gathering call, where the attorneys want the taxpayer to second-guess their non-willfulness and believe that they do not hurry up immediately, hire that firm, and submit an offshore disclosure, the IRS will be at their doorstep, but this is simply not true.
Adding insult to injury are attorneys who pursue this strategy by using false credentials, falsifying their experience (50 years of combined experience, which really just means 10 attorneys on staff with less than ~5 years of experience each), and using AI to create video presentations that are inaccurate.
Keep Your Wits About You
Especially when ethical taxpayers are nervous and concerned about their noncompliance, they can sometimes become targeted by overly aggressive lawyers during free consultations. It is important for taxpayers to keep in mind that the majority of the time they are non-willful, and even if they are willful, there are safe methods they can use to get into compliance with little to no risk of any criminal enforcement. enforcement.
Late Filing Penalties May Be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and/or other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs. Prior Year Non-Compliance
Once a taxpayer misses the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs. Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.