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IRS Procedures for Disclosing Offshore Accounts to the U.S. Government

There are Four main procedures for Individuals, Businesses and Estates to disclose unreported foreign accounts and foreign income to the United States. The four main procedures are:

  • OVDP Offshore Voluntary Disclosure Program
  • Streamlined Domestic Offshore Disclosure Program
  • Streamlined Foreign Offshore Disclosure Program
  • FBAR Delinquency Procedures

Below please find a summary of each program.

*Quiet disclosure is not a procedure but is a form of tax fraud and tax evasion, which may subject you to 100% fines and penalties along with the possible criminal investigation. If you performed a quiet disclosure, please note that it can be remedied before it is too late

Please click on the Titles of each program below for a more comprehensive summary.

                                                

OVDP Offshore Voluntary Disclosure Program


Why Enter the OVDP Program?

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.

Golding & Golding - Offshore Disclosure & FATCA Compliance

Golding & Golding – Offshore Disclosure & FATCA Compliance

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.

                                

What Type of Accounts Qualify Under OVDP?

Any account that would have to be included on either an 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 (reduced by any outstanding mortgage) 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 are the Requirements of OVDP?

The goal of OVDP is to bring individuals and businesses with unreported foreign and overseas accounts and income into U.S. Tax law compliance. While the requirements may seem overwhelming, if you select an international tax attorney who is experienced in handling these types of submissions, it can be a fairly simple routine — even in this sophisticated area of law — while providing you protection under the Attorney-Client Privilege.

The Result: A stress-free compliance plan program that works for you, your family, and your business to bring you into compliance!

Streamlined Domestic Offshore Disclosure Program

So…you just realized that you were supposed to be reporting your foreign accounts, assets and income, now what?

Maybe it was because you received a FATCA Letter, were educated by friends or family, or overheard a conversation while you were out regarding Foreign Account compliance.

Whether you are a U.S.Citizen who has Offshore Investments, a Legal Permanent Resident/Green-Card Holder who never closed your foreign accounts, or an individual who meets the “Substantial Presence Test” and still have literally no idea why as a Noncitizen/Nonlegal Permanent Resident you are somehow required to report your foreign accounts to the US, you are in a bit of a legal bind.

Moreover, with the introduction of FATCA (Foreign Account Tax Compliance Act) the chances have significantly increased that you may get caught with being out of compliance.

Nevertheless, Golding & Golding can work with you to cost-effectively submit to the Streamlined Domestic Offshore Disclosure Procedures and fix this “mess” quickly.

What is FATCA?

FATCA is a recent law that was enacted in 2010 and put into effect in 2014. The main purpose behind FATCA is to reduce offshore tax evasion and moving money from the United States to offshore/hidden/secret accounts.

More than 100 countries have entered into agreements (or agreements in substance) with the United States to enforce FATCA. Moreover, several thousands of Foreign Financial Institutions have agreed to comply with FATCA and report taxpayer information to the United States.

For you, the non-willful taxpayer, it is very difficult because under these new laws and guidelines almost everyone who fails to be in compliance with these new (and prior/existing) laws are considered to be “a bad guy or gal.” Thus, if you’re out of compliance it is very important to quickly get back into compliance using the Streamlined Program, which we would detail below.

*A word of caution: if you were willful then streamlined compliance procedures do not apply to your situation. Do not be fooled into thinking you could sneak one by the IRS by entering streamlined when you are willful; it is not worth the gamble.

*While there is no specific definition of willful, it is pretty clear to any experienced offshore disclosure attorney (15+ years of licensed Attorney Experience with a Master’s of Tax Law) when someone is willful. Thus, you should always speak with an experienced attorney to discuss your matter before making any decision about moving forward.

What am I supposed to Report?

There are three (3) main aspects to dealing with foreign money. The first aspect is reporting your foreign account(s) the secondaspect is reporting certain specified assets, and the third aspect is reporting your 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.

*The majority of individuals are usually non-willful, and this article will focus specifically on non-willfulness and the Streamlined Domestic Offshore Disclosure Procedures/Program.

Streamlined Foreign Offshore Disclosure Program

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.

I Just Learned about FATCA and FBAR

Did you recently learn you were supposed to be reporting your foreign accounts, assets and income?

Maybe it was because you received a FATCA Letter were educated by friends or family, or overheard a conversation while you were out.

Whether you are a U.S.Citizen who has Offshore Investments, a Legal Permanent Resident/Green-Card Holder who never closed your foreign accounts, or an individual who meets the “Substantial Presence Test” and still have literally no idea why as a Noncitizen/Nonlegal Permanent Resident you are somehow required to report your foreign accounts to the US, you are in a bit of a legal bind.

Moreover, with the introduction of FATCA (Foreign Account Tax Compliance Act) the chances have significantly increased that you may get caught with being out of compliance.

Nevertheless, Golding & Golding can work with you to cost-effectively submit to the Streamlined Foreign Offshore Disclosure Procedures and fix this “mess” quickly.

What is FATCA?

FATCA is a recent law that was enacted in 2010 and put into effect in 2014. The main purpose behind FATCA is to reduce offshore tax evasion and moving money from the United States to offshore/hidden/secret accounts.

More than 100 countries have entered into agreements (or agreements in substance) with the United States to enforce FATCA. Moreover, several thousands of Foreign Financial Institutions have agreed to comply with FATCA and report taxpayer information to the United States.

For you, the non-willful taxpayer, it is very difficult because under these new laws and guidelines almost everyone who fails to be in compliance with these new (and prior/existing) laws are considered to be “a bad guy or gal.” Thus, if you’re out of compliance it is very important to quickly get back into compliance using the Streamlined Program, which we would detail below.

*A word of caution: if you were willful then streamlined compliance procedures do not apply to your situation. Do not be fooled into thinking you could sneak one by the IRS by entering streamlined when you are willful; it is not worth the gamble.

*While there is no specific definition of willful, it is pretty clear to any experienced offshore disclosure attorney (15+ years of licensed Attorney Experience with a Master’s of Tax Law) when someone is willful. Thus, you should always speak with an experienced attorney to discuss your matter before making any decision about moving forward.

What am I supposed to Report?

There are three (3) main aspects to dealing with foreign money. The first aspect is reporting your foreign account(s) the secondaspect is reporting certain specified assets, and the third aspect is reporting your 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.

*The majority of individuals are usually non-willful, and this article will focus specifically on non-willfulness and the Streamlined Foreign Offshore Disclosure Procedures/Program.

FBAR Delinquency Procedures

What Accounts are Reported on an FBAR?

Filing FBARs and ensuring compliance with IRS International Tax Laws, Rules, and Regulations is extremely important for anyone, or any business that maintains:

  • Foreign Bank Accounts
  • Foreign Savings Accounts
  • Foreign Investment Accounts
  • Foreign Securities Accounts
  • Foreign Mutual Funds
  • Foreign Trusts
  • Foreign Retirement Plans
  • Foreign Business and/or Corporate Accounts
  • Insurance Policies (including some Life Insurance)
  • Foreign Accounts held in a CFC (Controlled Foreign Corporation); or
  • Foreign Accounts held in a PFIC (Passive Foreign Investment Company)

Golding & Golding provides Foreign Account Reporting (FBAR) strategies for clients around the globe in order to report Foreign Bank Accounts and become FBAR compliant. We also defense clients who are under FBAR Audit by the IRS and DOT.

We a re experienced U.S. and International FBAR Lawyers who represent clients worldwide with FBAR (Report of Foreign Bank and Financial Account) reporting compliance before the IRS (Internal Revenue Service), DOT (Department of Treasury), and DOJ (Department of Justice)

As Tax Lawyers and Enrolled Agents (Highest Credential awarded by the IRS), we are able to both analyze your tax situation as well as provide you, your officers and your business sound legal advice.

Our clients are located throughout California, as well as nationwide and around the world. We have represented clients with unreported accounts and assets exceeding $35,000,000 and with accounts and assets over 35 countries.

The United States takes FBAR reporting and compliance very seriously, and if not handled carefully a person may find themselves, their trust, or their business subject to significant taxes, fines, penalties, interest and possible criminal investigation.     

What is an FBAR?

In accordance with international tax law compliance, taxpayers who meet the threshold requirements are required to file an FBAR.

As stated above, an FBAR is a “Report of Foreign Bank and Financial Accounts” form. It is a form that is filed online directly with the Department of Treasury.  Unlike the tax return, the FBAR form must be filed by June 30th of the tax year and there are no extensions available for filing it late. If you attempt to file it late, there can be serious repercussions, including fines and penalties – since it is considered Quiet Disclosure or Silent Disclosure in an attempt to circumvent the OVDP or Streamlined Program rules and regulations and filing an untimely FBAR.

What is the “Reasonable Cause” exception?

If you fail to comply with US tax law and failed to properly file certain international tax forms such as the FBAR, 8938, 5471, 3521 or other forms the is hope. The Internal Revenue Service understands that many people will not file the necessary international tax forms did not do so simply because they were unaware of the requirement. In other words, there’s no reason why these individuals should be penalized simply for not knowing about a certain filing requirements.

*Submitting under the Reasonable Cause Exception instead of one of the approved programs can be risky and you should speak with an experienced international tax attorney before making any affirmative statement to the IRS.