- 1 IRS Offshore Disclosure
- 2 1. Why is Disclosure of Offshore Assets so Important?
- 3 2. Can’t I Just Amend and/or File Going Forward?
- 4 3. IRS Offshore Disclosure will Limit Penalties
- 5 4. The IRS has New Ways to Find Your Offshore Accounts & Assets
- 6 5. The IRS Offshore Disclosure Programs will not be around Forever
IRS Offshore Disclosure – 5 Good Reasons to Get Offshore Compliant in 2019
IRS Offshore Disclosure: When a Taxpayer has not reported foreign accounts, assets, income, or investments, they are out of U.S. offshore tax compliance.
The Taxpayer can then use one of the approved IRS Offshore Disclosure methods to get into compliance. IRS Offshore Disclosure is also generally referred to as “Offshore Compliance,” “Voluntary Disclosure,” and “International Tax Compliance.”
IRS Offshore Disclosure
The are a few different popular methods an individual, business, trust, or estate can use to get into offshore and foreign compliance.
IRS Offshore Disclosure can be broken down into the following methods for compliance:
- OVDP (Offshore Voluntary Disclosure Program)
- Post-OVDP (Internal Revenue Manual Procedures)
- Streamlined Domestic Offshore Procedures (SDOP)
- Streamlined Foreign Offshore Procedures
- Reasonable Cause & Delinquency Procedures
- Hybrid Offshore Disclosure & Expatriation
1. Why is Disclosure of Offshore Assets so Important?
While that may seem like no big deal, the IRS sees it differently. The Internal Revenue Service sees offshore compliance of foreign money as a highly crucial and important initiative — since it means the IRS is losing out on both knowledge and tax dollars.
In fact, the IRS sees it as “so important,” that the IRS has directed a majority of its limited resources to offshore enforcement.
The IRS has the right to issue fines and penalties against U.S. Persons (and even non U.S. Persons) who do not remain in IRS Offshore Compliance.)
2. Can’t I Just Amend and/or File Going Forward?
No. If you just amend returns, or file going forward, you have committed a tax crime. This type of submission is referred to as a “Quiet Disclosure.” The IRS has stated that if they catch someone submitting a quiet disclosure, they will come down hard on the taxpayer – and that may include a criminal investigation.
3. IRS Offshore Disclosure will Limit Penalties
Yes, all penalties are bad – but not all penalties are created equal.
Under some of the above-referenced offshore voluntary compliance programs, the penalties can be reduced, limited, and even waived.
On the other hand, if you are caught, and the IRS decides to make an example of you, the penalty may reach 100% value, along with the IRS initiating an international criminal tax investigation against you.
4. The IRS has New Ways to Find Your Offshore Accounts & Assets
Over the past few years, the IRS has initiated many different programs designed to search and uncover your offshore account information. Some of the more recent methods, include:
By using these methods, the IRS can uncover account information about your foreign accounts that you may not have thought they would have the access to find.
And, once the IRS has the information, they may initiate a further investigation, without even telling you…until the IRS Special Agents arrive at your door.
5. The IRS Offshore Disclosure Programs will not be around Forever
Just recently, the IRS ended the nearly 10 year-long OVDP (Offshore Voluntary Disclosure Program). The IRS has also indicated as of lately that the “Streamlined Programs” will not be around forever, and they will presumably end these programs as well in the upcoming years.
Since the Streamlined Programs reduce the penalties to only 5% (or even a complete penalty waiver for foreign residents who qualify), it may be a good time to take advantage of these programs, before it is too late.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)