Are Unreported Foreign Assets a Criminal Tax Matter?

Are Unreported Foreign Assets a Criminal Tax Matter?

Failure to Report Offshore Funds to IRS is Criminal

Reporting foreign assets to the IRS is an integral part of international information reporting compliance for US Taxpayers worldwide. Unfortunately, the internet is littered with false information about how when a Taxpayer is non-compliant with reporting foreign accounts, assets, investments, and income — this automatically makes them criminally liable. The reason these attorneys make these false representations is to sell them on “Criminal Tax Defense” services that are not necessary. When a Taxpayer has unreported foreign assets, there are various civil procedures (aka Offshore Tax Amnesty) available to get them into compliance with the IRS and FinCEN — whether they are willful or non-willful. In fact, the Internal Revenue Service has developed several offshore amnesty programs to assist taxpayers who have been reported foreign assets. Non-compliance with foreign asset reporting is rarely a criminal violation — and even when a Taxpayer is considered willful for a civil violation, that does not make them criminally willful — or subject to criminal prosecution. Here are three (3) important facts about unreported foreign assets to the IRS:

Most Unreported Foreign Asset Violations are Civil

When a person runs afoul of the US reporting requirements for foreign assets, accounts, and investments it is generally a civil matter and results in civil penalties – if any penalties at all — since some of the offshore amnesty programs can result in a complete penalty waiver. The IRS has developed the various offshore tax amnesty programs to assist Taxpayers with safely getting into compliance for unreported foreign assets – and the IRS has programs available for Taxpayers who are both willful and non-willful

Willfulness Does NOT Mean Criminal Tax Liability

Less-experienced counsel wants Taxpayers to believe that if they are willful, then they are subject to criminal liability – but that is not true. The level of proof and burden on the government to prove civil willfulness for unreported foreign assets is lower than criminal willfulness. Thus, just being willful in the civil arena does not equate to a Taxpayer being subject to criminal prosecution. To prove a Taxpayer guilty of an actual crime, the US Government must show they acted willfully and provie it beyond a reasonable doubt.

Offshore Voluntary Disclosure is Not a Criminal Process

When a Taxpayer acted willfully – or cannot certify under penalty of perjury they acted non-willful – they no longer qualify for the non-willful foreign asset reporting amnesty programs such as Streamlined Filing Compliance Procedures (Domestic or Foreign); Delinquency Procedures, or Reasonable Cause – but they can still submit to the IRS Voluntary Disclosure Program (VDP). By submitting to VDP a Taxpayer is not entering into a plea deal or acknowledging any criminal violation. In fact, by submitting to VDP for unreported foreign assets, a Taxpayer can almost always avoid criminal liability.

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