Basics of IRS International Foreign Account & Asset Penalties (2018)

The IRS methods for issuing penalties involving foreign accounts vs. tax fraud are incongruent at best. Take the following for example:

Civil Foreign Account Penalties vs. Civil Tax Fraud

FBAR Willful Penalties can reach as high as 100% in a multi-year audit. And, in order to prove FBAR Willfulness in a civil action, the IRS must only meet the lowest standard of proof (Preponderance of the Evidence). Moreover, in order to meet its burden in proving willfulness, the IRS does NOT need to prove intent; rather, the IRS can swoop in and take away 100% of your money merely by proving “reckless disregard.”

Conversely, to prove Civil Tax Fraud, which may result in significantly less penalties, the IRS must meet the Clear and Convincing evidence standard — which is significantly higher than Preponderance of the Evidence. While nobody wants to get hit with Civil Tax Fraud and stain their “permanent record,” the monetary damages may very well pale in comparison, since the penalties are 75% of the underpayment. 

Thus, if you have a high unreported foreign balance in your accounts abroad, and low income, the IRS may be able to take much more of your money than if the IRS took the extra steps to try and prove Tax Fraud against you.

Basics of IRS International Foreign Account & Asset Penalties (2018) by Golding & Golding

Basics of IRS International Foreign Account & Asset Penalties (2018) by Golding & Golding

This was recently summarized, in detail, in the case of In Re Garrity.

TL; DR

Short on time, or you get bored easily? Here are the main takeaways from this case:

– Civil FBAR Penalties only require Preponderance of the Evidence

– FBAR Willfulness includes Reckless Disregard

– FBAR Standard of Proof is Preponderance of the Evidence

– The Amount of Penalties has no impact on the Standard of Proof required.

What Does That Mean?

In other words, even though willfully failing to file an FBAR (civil penalties) may result in higher fines and penalties than committing civil tax fraud, the amount of evidence the U.S. Government needs to prove FBAR willfulness is less than the proof needed to prove Civil Tax Fraud.

Stated another way, if you committed civil willful FBAR violations (which are criminal in nature) you may be subject to higher penalties than the penalties the IRS can issue Civil Tax Fraud, which requires Clear and Convincing Evidence. 

Why? Because according to the courts, with FBAR Violations…it’s just money.

In reality, it is further proof that once there is an “international, foreign, or offshore” component to IRS non-compliance, the risk of significant money penalties significantly increases.

Recent Case: In Re Garrity

In the recent case of In re Garrity, there was a situation in which taxpayers argued to reduce FBAR Willful Penalties. Taxpayers presented two main questions/issues:

  1. Does reckless disregard qualifies as willfulness; and
  2. What is standard of proof should apply to FBAR willful penalties

Within the court’s holding re: Standard of Proof required for FBAR Willfulness, the court confirmed that the lower standard should prevail, and provided additional summary on why the standard of proof is lower for FBAR Willful vs. Civil Tax Fraud – despite the IRS Chief Counsel surmising that the standard should be the higher “Clear and Convincing Evidence” (a significantly higher standard)

The Distinction between FBAR Willfulness vs. Tax Fraud

Tax fraud comes in all shapes and sizes — and does not necessarily involve foreign or offshore issues. In any particular case, there may be an international or offshore component to the fraud, or there may not be. Conversely, FBAR Willfulness deals specifically with whether a person intentionally or recklessly avoided reporting foreign accounts.

Civil FBAR Penalties

Civil FBAR penalties for willfulness can be very high. In fact, even if a person has a relatively small balance, the penalties in a willful situation can reach as high as $100,000, per violation and up to 100% value of the money in a multi-year audit (aka 50% per year)

As a result, you would think the IRS has a pretty heavy burden on their shoulders to provide substantial proof to support such high penalties…well, they don’t. In fact, it is the lowest threshold of proof allowable by law.

Standard of Proof

Courts nationwide have found unanimously at this time that the standard of for FBAR Willful penalties should be a lower standard of proof, being preponderance of the evidence.   In the sliding scale of “standards of proof,” preponderance of the evidence ranks as the lowest (as in, the government requires the least amount of evidence to provide its case)

In multiple different cases, Taxpayers have argued that while FBAR Willfulness penalties are “civil penalties,” they are criminal-like in nature, and therefore the government should have to prove a higher clear and convincing standard which is typically quantified at ~75%, as opposed to preponderance of the evidence, which is essentially more than 50%.

What Do the Courts Say?

In Garrity, the court addressed this issue(s), and provided the following:

As Congress did not specify the legal standard the Court should apply in a “civil action” brought by the Secretary under section 5321, I must determine what standard of proof applies. The starting point for this inquiry is the well-established principle that “[i]n a typical civil suit for money damages, plaintiffs must prove their case by a preponderance of the evidence.” Herman & MacLean v. Huddleston, 459 U.S. 375, 387 (1983).

The Supreme Court noted in Huddleston that where Congress has not specified a standard of proof, the Court has applied the clear and convincing evidence standard in civil matters only “where particularly important individual interests or rights are at stake,” such as in cases involving termination of parental rights, involuntary commitment, and deportation. 459 U.S. at 389.”

But the Penalties can be very high

So what? According to this court, the default position in a civil matter is preponderance of the evidence. And, just because the amount of penalties can be staggeringly high, that in and of itself does not increase the burden. Therefore, even though a person may be subject to hundreds of thousands, if not millions of dollars in FBAR penalties, in reality these are just money penalties in a civil matter and therefore there is no additional burden of proof required by the US government to invoke willful penalties.

What About the Severity of These Civil Sanctions

As the court further provided “imposition of even severe civil sanctions that do not implicate such interests has been permitted after proof by a preponderance of the evidence,” the Court held that the preponderance of the evidence standard applied to an action involving an alleged fraud in the sale or purchase of securities. Id. at 389-90. In doing so, the Court described the preponderance of the evidence standard as the one “generally applicable in civil actions.” Id. Case 3:15-cv-00243-MPS Document 116 Filed 04/03/18 Page 3 of 12

The Supreme Court has since rejected arguments that the higher standard of clear and convincing evidence applies to particular civil actions. See Grogan v. Garner, 498 U.S. 279, 288 (1991).

FBAR Penalties Nationwide – Preponderance of the Evidence

Using these principles, every court that has answered the question before me has held that the preponderance of the evidence standard governs suits by the government to recover civil FBAR penalties.

  • Bedrosian v. United States, No. CV 15-5853, 2017 WL 3887520, at *1 (E.D. Pa. Sept. 5, 2017);
  • United States v. Bohanec, 263 F. Supp. 3d 881, 889 (C.D. Cal. 2016)
  • United States v. McBride, 908 F. Supp. 2d 1186, 1201-02 (D. Utah 2012)
  • United States v. Williams, No. 1:09- cv-437, 2010 WL 3473311, at *1, 5 (E.D. Va. Sept. 1, 2010)

No Support for a Higher Evidence Standard

Defendants did not point to case law holding that the clear and convincing evidence standard applies to civil FBAR penalty cases. Rather, Defendants argue that the civil FBAR statute is analogous to the civil tax fraud statute, which requires proof by clear and convincing evidence.

Defendants also argue that an internal memo by the Office of Chief Counsel of the IRS shows it should be Clear and Convincing evidence.

IRS Memo re: FBAR Penalties

There is a memo that was issued several years ago. It was a memo by IRS Office of Chief Counsel regarding the standard of proof that IRS counsel believed we be applied in situations such as this. In that memo, it was a opined that the standard of proof should be clear and convincing evidence (which is significantly higher than preponderance of the evidence).

In this case, the judge simply refused to apply the standard and stated that the parties agreed that IRS counsel’s opinion on the standard of proof does not mean that it is the standard of proof that should be applied.

In other words, even though IRS’ own counsel at the time stated that the standard of proof should properly be clear and convincing evidence, that is just IRS’s counsel’s opinion and not law.

And therefore, since all the other courts found that preponderance of the evidence is the proper standard, the judge in this case was not going to single-handedly raised the burden simply because an attorney working for the IRS issued a memo, on their opinion regarding what the standard of proof should be.

In Other Words, It Really is Just Money…

The court also provide that: “The civil FBAR penalty does not implicate “important individual interests or rights” Defendants argue that the clear and convincing evidence standard applies because the penalty for willful FBAR violations is “far more draconian” than the civil tax fraud penalty (ECF Chief Counsel Memorandum 200603026 (January 20, 2006)

As Huddleston and Grogan indicate, it is the type of interest or right involved that triggers a higher standard of proof, not the amount in controversy; courts have not viewed cases involving “even severe civil sanctions” to implicate “important individual interests or rights” to warrant a higher standard of proof. Huddleston, 459 U.S. at 389-90. See also Halo v. Electronics,

Criminal Willfulness Distinguished

The court distinguished civil and criminal tax fraud as follows:

Defendants also argue that the Government must prove that Mr. Garrity, Sr. intentionally violated a known legal duty in order to satisfy the element of willfulness, and that proof of reckless conduct is insufficient.

The court found Defendants’ arguments unpersuasive, as they do not account for the well-established distinction between civil and criminal formulations of willfulness.

Criminal Willful vs. Civil Willful

The Supreme Court explicitly acknowledged in Safeco that “[i]t is different in the criminal law. When the term ‘willful’ or ‘willfully’ has been used in a criminal statute, we have regularly read the modifier as limiting liability to knowing violations . . . . Civil use of the term, however, typically presents neither the textual nor the substantive reasons for pegging the threshold of liability at knowledge of wrongdoing.” 551 U.S. at 57 n.9.

Defendants concede that numerous courts have found that willfulness in the civil FBAR context includes reckless conduct. (ECF No. 106 at 11.) See United States v. Williams, 489 F. App’x 655, 658 (4th Cir. 2012) (reversing the district court’s ruling, as “at a minimum, Williams’s undisputed actions establish reckless conduct, which satisfies the proof requirement under § 5314”)

  • United States v. Kelley-Hunter, 281 F. Supp. 3d 121, 124 (D.D.C. 2017)
  • United States v. Katwyk, No. CV 17-3314-GW, 2017 WL 6021420, at *4 (C.D. Cal. Oct. 23, 2017)
  • Bedrosian v. United States, Civ. No. 15-5853, 2017 WL 4946433, at *3 (E.D. Pa. Sept. 20, 2017)
  • United States v. Bohanec, 263 F. Supp. 3d 881, 888-89 (C.D. Cal. 2016)
  • United States v. Bussell, No. CV 15- 02034 SJO, 2015 WL 9957826, at *5 (C.D. Cal. Dec. 8, 2015)
  • United States v. McBride, 908 F. Supp. 2d 1186, 1204 (D. Utah 2012)
  • United States v. Williams, No. 1:09-cv-437, 2010 WL 3473311

Defendants cite no case in which a court has held to the contrary. Rather, despite the clear distinction the Supreme Court has drawn between willfulness in the civil and criminal contexts, the cases Defendants principally rely on are criminal cases.

As the Supreme Court has made clear, those criminal cases do not control this case.

In other words, even though in order to prove criminal willfulness, just proving ‘reckless disregard’ would be insufficient (since it lacks “intent”), the same is not true for civil willfulness. In order to prove civil willfulness, the U.S. Government need not prove intent — which is why “reckless disregard” is sufficient to prove civil willfulness.

Summary of the Case Holding

This case is very important, because it confirms several key issues:

  1. FBAR Penalties are Civil and require only Preponderance of the Evidence
  2. FBAR Willfulness (unlike Criminal Willfulness) includes Reckless Disregard
  3. FBAR Standard of Proof is Preponderance of the Evidence.
  4. The Amount of Penalties has no impact on the Standard of Proof required.

Get Into Compliance Before it is Too Late

OVDP is set to end on September 28, 2018, which severely limits your time to get into IRS Offshore Amnesty, especially if you were willful.

How Does Offshore Voluntary Disclosure Work?

IRS Voluntary Disclosure of Foreign or Offshore Accounts is a legal method for getting into IRS Tax and Reporting compliance before the IRS finds you first.  At Golding & Golding, we limit our entire tax law practice to IRS Offshore Voluntary Disclosure. 

Why IRS Voluntary Disclosure?

With the introduction and enforcement of FATCA (Foreign Account Tax Compliance Act) and FATCA penalties, coupled by the renewed interest in the IRS issuing FBAR (Report of Foreign Bank and Financial Account Form aka FinCEN 114) penalties — which are both very steep – it is typically a better strategy to be proactive and get into compliance, than to play “defense.”

FBAR penalties alone can reach ~$12,500 per account, per year (adjusted inflation from $10,000). While this is the maximum penalty, the “recommended penalty” is still $12,500 per year (usually 3-6 years). 

4 Types of IRS Offshore Voluntary Disclosure Programs

There are typically four types of IRS Offshore Voluntary Disclosure programs, and they include:

  • Offshore Voluntary Disclosure Program (OVDP)
  • Streamlined Domestic Offshore Procedures (SDOP)
  • Streamlined Foreign Offshore Procedures (SFOP)
  • Reasonable Cause (RC)

IRS Voluntary Disclosure of Offshore Accounts

Offshore Voluntary Disclosure Tax law is very complex. There are many aspects that go into any particular tax calculation, including the legal status, marital status, business status and residence status of the taxpayer.

When Do I Need to Use Voluntary Disclosure?

Voluntary Disclosure is for individuals, estates, and businesses who are out of compliance with the IRS and the Department of Treasury. What does that mean? It means that for one or more years, you were required to file a U.S. tax return, FBAR or other International Informational Return and you did not do so timely, then you are out of compliance.

Common Un-filed IRS International Tax Forms

Common un-filed international tax forms, include:

If the IRS discovers that you are out of compliance, you may become subject to extensive fines and penalties – ranging from a warning letter all the way up to tax liens, tax levies, seizures, and criminal investigations. To combat this, you can take the proactive approach and submit to IRS Offshore Voluntary Disclosure.

Golding & Golding – Offshore Disclosure

At Golding & Golding, we limit our entire practice to offshore disclosure (IRS Voluntary Disclosure of Foreign and U.S. Assets). The term offshore disclosure is a bit of a misnomer, because the term “offshore” generally connotes visions of hiding money in secret places such as the Cayman Islands, Bahamas, Malta, or any other well-known tax haven jurisdiction – but that is not the case.

In fact, any money that is outside of the United States is considered to be offshore; the term offshore is not a bad word. In other words, merely because a person has money offshore (a.k.a. overseas or in a foreign country) does not mean that money is the result of ill-gotten gains or that the money is being “hidden.”

It just means it is not in the United States. Many of our clients have assets and bank accounts in their homeland countries and these are considered offshore assets and offshore bank accounts.

The Devil is in the Details…

If you do have money offshore, then it is very important to ensure that the money has been properly reported to the U.S. government. In addition, it is also very important to ensure that if you are earning any foreign income from that offshore money, that the earnings are being reported on your U.S. tax return.

It does not matter whether your money is in a country that does not tax a particular category of income (for example, many Asian countries do not tax passive income). It also does not matter if you are a dual citizen and/or if that money has already been taxed in the foreign country.

Rather, the default position is that if you are required to file a U.S. tax return and you meet the minimum threshold requirements for filing a U.S. tax return, then you have to include all of your foreign income. If you already paid foreign tax on the income, you may qualify for a Foreign Tax Credit. In addition, if the income is earned income – as opposed to passive income – and you meet either the Bona-Fide Resident Test or Physical-Presence Test, then you may qualify for an exclusion of that income; nevertheless, the money must be included on your tax return.

What if You Never Report the Money?

If you are in the unfortunate position of having foreign money or specified foreign assets that should have been reported to the U.S. government, but which you have not reported —  then you are in a bit of a predicament, which you will need to resolve before it is too late.

As we have indicated numerous times on our website, there are very unscrupulous CPAs, Attorneys, Accountants, and Tax Representatives who would like nothing more than to get you to part with all of your money by scaring you into believing you are automatically going to be arrested, jailed, or deported because you have unreported money. While that is most likely not the case (depending on the facts and circumstances of your specific situation), you may be subject to extremely high fines and penalties.

Moreover, if you knowingly or willfully hid your foreign accounts, foreign money, and offshore assets overseas, then you may become subject to even higher fines and penalties…as well as a criminal investigation by the special agents of the IRS and/or DOJ (Department of Justice).

Getting into Compliance

There are five main methods people/businesses use to get into compliance. Four of these methods are perfectly legitimate as long as you meet the requirements for the particular mechanism of disclosure. The fifth alternative, which is called a Quiet Disclosure a.k.a. Silent Disclosure a.k.a. Soft Disclosure, is ill-advised as it is illegal and very well may result in criminal prosecution.

5 IRS Methods for Offshore Compliance

  • OVDP
  • Streamlined Domestic Offshore Procedures
  • Streamlined Foreign Offshore Procedures
  • Reasonable Cause
  • Quiet Disclosure (Illegal)

We are going to provide a brief summary of each program below. We have also included links to the specific programs. If you are interested, we have also prepared very popular “FAQs from the Trenches” for FBAR, OVDP and Streamlined Disclosure reporting. Unlike the technical jargon of the IRS FAQs, our FAQs are based on the hundreds of different types of issues we have handled over the many years that we have been practicing international tax law and offshore disclosure in particular.

After reading this webpage, we hope you develop a basic understanding of each offshore disclosure alternative and how it may benefit you to get into compliance. We do not recommend attempting to disclose the information yourself as you may become subject to an IRS investigation insofar as you will have to answer questions directly to the IRS, which you can avoid with an attorney representative.

If you retain an attorney, then you will get the benefit of the attorney-client privilege which provides confidentiality between you and your representative. With a CPA, there is a relatively small privilege which does provide some comfort, but the privilege is nowhere near as strong as the confidentiality privilege you enjoy with an attorney.

Since you will be dealing with the Internal Revenue Service and they are not known to play nice or fair – it is in your best interest to obtain an experienced Offshore Disclosure Attorney.

1. OVDP 

OVDP is the Offshore Voluntary Disclosure Program — a program designed to facilitate taxpayer compliance with IRS, DOT, and DOJ International Tax Reporting and Compliance. It is generally reserved for individuals and businesses who were “Willful” (aka intentional) in their failure to comply with U.S. Government Laws and Regulations.

The Offshore Voluntary Disclosure Program is open to any US taxpayer who has offshore and foreign accounts and has not reported the financial information to the Internal Revenue Service (restrictions apply). There are some basic program requirements, with the main one being that the person/business who is applying under this amnesty program is not currently under IRS examination.

The reason is simple: OVDP is a voluntary program and if you are only entering because you are already under IRS examination, then technically, you are not voluntarily entering the program – rather, you are doing so under duress.

Any account that would have to be included on either the FBAR or 8938 form as well as additional income generating assets such as rental properties are accounts that qualify under OVDP. It should be noted that the requirements are different for the modified streamlined program, in which the taxpayer penalties are limited to only assets that are actually listed on either an FBAR or 8938 form; thus the value of a rental property would not be calculated into the penalty amount in a streamlined application, but it would be applicable in an OVDP submission.

An OVDP submission involves the failure of a taxpayer(s) to report foreign and overseas accounts such as: Foreign Bank Accounts, Foreign Financial Accounts, Foreign Retirement Accounts, Foreign Trading Accounts, Foreign Insurance, and Foreign Income, including 8938s, FBAR, Schedule B, 5741, 3520, and more.

What is Included in the Full OVDP Submission?

The full OVDP application includes:

  • Eight (8) years of Amended Tax Return filings;
  • Eight (8) Years of FBAR (Foreign Bank and Account Reporting Statements);
  • Penalty Computation Worksheet; and
  • Various OVDP specific documents in support of the application.

Under this program, the Internal Revenue Service wants to know all of the income that was generated under these accounts that were not properly reported previously. The way the taxpayer accomplishes this is by amending tax returns for eight years.

Generally, if the taxpayer has not previously reported his accounts, then there are common forms which were probably excluded from the prior year’s tax returns and include 8938 Forms, Schedule B forms, 3520 Forms, 5471 Forms, 8621 Forms, as well as proof of filing of FBARs (Foreign Bank and Financial Account Reports).

OVDP Penalties

The taxpayer is required to pay the outstanding tax liability for the eight years within the disclosure period – as well as payment of interest along with another 20% penalty on that amount (for nonpayment of tax). To give you an example, let’s pick one tax year during the compliance period. If the taxpayer owed $20,000 in taxes for year 2014, then they would also have to include in the check the amount of $4,000 to cover the 20% penalty, as well as estimated interest (which is generally averaged at about 3% per year). This must be done for each year during the compliance period.

Then there is the “FBAR/8938” Penalty. The Penalty is 27.5% (or 50% if any of the foreign accounts are held at an IRS “Bad Bank”) on the highest year’s “annual aggregate total of unreported accounts (accounts which were previously reported are not calculated into the penalty amount).

For OVDP, the annual aggregate total is determined by adding the “maximum value” of each unreported account for each year, in each of the last 8 years. To determine what the maximum value is, the taxpayer will add up the highest balances of all of their accounts for each year. In other words, for each tax year within the compliance period, the application will locate the highest balance for each account for each year, and total up the values to determine the maximum value for each year.

Thereafter, the OVDP applicant selects the highest year’s value, and multiplies it by either 27.5%, or possibly 50% if any of the money was being held in what the IRS considers to be one of the “bad banks.” When a person is completing the penalty portion of the application, the two most important things are to breathe and remember that by entering the program, the applicant is seeking to avoid criminal prosecution!

                         

2. Streamlined Domestic Offshore Disclosure

The Streamlined Domestic Offshore Disclosure Program is a highly cost-effective method of quickly getting you into IRS (Internal Revenue Service) or DOT (Department of Treasury) compliance.

What am I supposed to Report?

There are three main reporting aspects: (1) foreign account(s), (2) certain specified assets, and (3) foreign money. While the IRS or DOJ will most likely not be kicking in your door and arresting you on the spot for failing to report, there are significantly high penalties associated with failing to comply.

In fact, the US government has the right to penalize you upwards of $10,000 per unreported account, per year for a six-year period if you are non-willful. If you are determined to be willful, the penalties can reach 100% value of the foreign accounts, including many other fines and penalties… not the least being a criminal investigation.

Reporting Specified Foreign Assets – FATCA Form 8938

Not all foreign assets must be reported. With that said, a majority of assets do have to be reported on a form 8938. For example, if you have ownership of a foreign business interest or investment such as a limited liability share of a foreign corporation, it may not need to be reported on the FBAR but may need to be disclosed on an 8938.

The reason why you may get caught in the middle of whether it must be filed or not is due largely to the reporting thresholds of the 8938. For example, while the threshold requirements for the FBAR is when the foreign accounts exceed $10,000 in annual aggregate total – and is not impacted by marital status and country of residence – the same is not true of the 8938.

The threshold requirements for filing the 8938 will depend on whether you are married filing jointly or married filing separate/single, or whether you are considered a US resident or foreign resident.

Other Forms – Foreign Business

While the FBAR and Form 8938 are the two most common forms, please keep in mind that there are many other forms that may need to be filed based on your specific facts and circumstances. For example:

  • If you are the Beneficiary of a foreign trust or receive a foreign gift, you may have to file Form 3520.
  • If you are the Owner of a foreign trust, you will also have to file Form 3520-A.
  • If you have certain Ownerships of a foreign corporation, you have to file Form 5471.
  • And (regrettably) if you fall into the unfortunate category of owning foreign mutual funds or any other Passive Foreign Investment Companies then you will have to file Form 8621 and possibly be subject to significant tax liabilities in accordance with excess distributions.

Reporting Foreign Income

If you are considered a US tax resident (which normally means you are a US citizen, Legal Permanent Resident/Green-Card Holder or Foreign National subject to US tax under the substantial presence test), then you will be taxed on your worldwide Income.

It does not matter if you earned the money in a foreign country or if it is the type of income that is not taxed in the country of origin such as interest income in Asian countries. The fact of the matter is you are required to report this information on your US tax return and pay any differential in tax that might be due.

In other words, if you earn $100,000 USD in Japan and paid 25% tax ($25,000) in Japan, you would receive a $25,000 tax credit against your foreign earnings. Thus, if your US tax liability is less than $25,000, then you will receive a carryover to use in future years against foreign income (you do not get a refund and it cannot be used against US income). If you have to pay the exact same in the United States as you did in Japan, it would equal itself out. If you would owe more money in the United States than you paid in Japan on the earnings (a.k.a. you are in a higher tax bracket), then you have to pay the difference to the U.S. Government.

                           

3. Streamlined Foreign Offshore Disclosure

What do you do if you reside outside of the United States and recently learned that you’re out of US tax compliance, have no idea what FATCA or FBAR means, and are under the misimpression that you are going to be arrested and hauled off to jail due to irresponsible blogging by inexperienced attorneys and accountants?

If you live overseas and qualify as a foreign resident (reside outside of the United States for at least 330 days in any one of the last three tax years or do not meet the Substantial Presence Test), you may be in for a pleasant surprise.

Even though you may be completely out of US tax and reporting compliance, you may qualify for a penalty waiver and ALL of your disclosure penalties would be waived. Thus, all you will have to do besides reporting and disclosing the information is pay any outstanding tax liability and interest, if any is due. (Your foreign tax credit may offset any US taxes and you may end up with zero penalty and zero tax liability.)

*Under the Streamlined Foreign, you also have to amend or file 3 years of tax returns (and 8938s if applicable) as well as 6 years of FBAR statements just as in the Streamlined Domestic program.

                      

4. Reasonable Cause

Reasonable Cause is different than the above referenced programs. Reasonable Cause is not a “program.” Rather, it is an alternative to traditional Offshore Voluntary Disclosure, which should be considered on a case by case basis, taking the specific facts and circumstances into consideration.

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