Out of Tax Compliance to both the U.S. & Foreign Tax Authorities?
Being out of tax compliance to both the IRS and foreign tax authorities for unreported accounts and income is not uncommon, and you are not alone. We can help you get into compliance.
- 1 U.S. & Foreign Tax Non-Compliance
- 2 Double the Risk
- 3 Dangers of Undisclosed Accounts, Multiple Countries
- 4 Foreign Country with No Offshore Disclosure Program
- 5 Streamlined or Reasonable Cause
- 6 Compliant with Foreign Country Tax, But Not the IRS
- 7 Non-Compliance in Multiple Countries
- 8 Streamlined or Reasonable Cause is No Longer an Option
- 9 Manafort is Typical, Even if the Amount of Money is High
- 10 Golding & Golding, A PLC
U.S. & Foreign Tax Non-Compliance
It is very common for individuals who have unreported foreign accounts and income which they have not reported to the IRS to also have unreported accounts and income which have not been reported to the foreign tax authorities as well.
Example: Denise moves to the United States from a foreign country. She does not report her Foreign accounts or income in the U.S., and she does not report her U.S. Accounts and income to the foreign country’s tax authority.
Due to the fact that Offshore Tax Evasion has become a priority enforcement for many countries, coupled by the fact that many countries enforce criminal penalties for non-compliance (and do not offer offshore voluntary disclosure programs) you must take careful and calculated action before it is too late.
Double the Risk
Unfortunately, unlike the United States that has formalized Offshore Disclosure Programs such as OVDP, many foreign countries do not offer any offshore voluntary disclosure programs, or if they did, they have already terminated their program with the intent to aggressively pursue citizens and residents for tax crimes.
*This is not to say all individuals who have unreported income in a foreign country and United States are guilty of a tax crime, but it does require an in-depth analysis of your specific facts to determine where you fall on the “willful vs. non-willful” spectrum.
Dangers of Undisclosed Accounts, Multiple Countries
If a person has undisclosed accounts in both the United States and a foreign country and believe that they were willful, they cannot enter the Streamlined Program or submit a Reasonable Cause letter – that is illegal.
Alternatively, if the person was non-willful, but wants to reduce the chances of an IRS Audit under Streamlined – since during the audit the IRS may request documents proving compliance with the Foreign Country’s tax law, it may be better for that individual to submit to OVDP.
Foreign Country with No Offshore Disclosure Program
OVDP may be preferred, especially if a person is out-of-tax compliance in multiple countries and those other countries do not offer an Offshore Disclosure Program.
This is especially true in the common situation in which the person believes they were willful.
Streamlined or Reasonable Cause
If a person is non-willful or qualifies for reasonable cause for not properly complying with offshore tax related issues such as account reporting and foreign asset disclosure, then the streamlined program may be a viable option.
Compliant with Foreign Country Tax, But Not the IRS
In this type of situation, the Streamlined Program may be a fine option. For example, if a person is a visa holder who met the substantial presence test or Legal Permanent Resident who did not understand that by virtue of their status, they still have to report just as they would if they were US citizens, they may qualify for Streamlined.
But, this would usually presume they were compliant in the Foreign Country and/or did not have a U.S. CPA or Tax Preparer inquire (especially in writing) if they had foreign accounts, assets or income.
Non-Compliance in Multiple Countries
Alternatively, if a person has not complied in multiple countries (so that they are not in Offshore Reporting or Tax Compliance anywhere), and especially if they had a U.S. CPA who asked them about Foreign Accounts, Assets, or Income (and they responded “No”), it can become difficult to qualify for streamlined or reasonable cause.
Example: Denise is from a foreign country. She is aware that under her home country’s tax law (where she was raised and filed taxes for many years), she is required to report her foreign accounts to the foreign government. Denise resides in the United States and therefore does not file or report the accounts abroad. She thinks she will probably never get caught; she never expects to receive a FATCA Letter.
Meanwhile, Denise is also a resident of the United States and even though she has a CPA who asked about whether she had foreign accounts in writing, Denise failed to disclose the foreign accounts to the CPA. Denise understood the questions in the CPAs Binder (aka organizer or questionnaire) but still answered, No to the questions about foreign accounts or income.
As a result, Denise has not complied with either country’s tax laws.
Streamlined or Reasonable Cause is No Longer an Option
Despite what any Attorney may tell Denise, submitting a reasonable cause statement or going streamlined is no longer an option, because Denise had every opportunity to comply, but failed to do so. As demonstrated by the recent findings of special counsel in the Manafort Case (along with countless other cases), the U.S. government will focus on whether the CPA asked an individual if they had foreign Accounts.
It does not matter if the risk of audit is low, and it does not matter if the amount of unreported income is low, because neither of these aforementioned facts negates the willfulness.
*If the CPA did not send a written binder and/or the person does not speak fluent English, did not understand the CPAs questions, and the CPA did not offer translation services, the analysis would be different.
Manafort is Typical, Even if the Amount of Money is High
In the Manafort case, the CPA point-blank asked him by way of a written binder as to whether he had foreign accounts and he stated “No.” Just because Manafort was operating a multi-jurisdictional tax fraud is immaterial.
What is important is that despite all of the different facts and circumstances involving that particular case (and even though it was high profile) – Special Counsel still focused on the fact that the CPA asked him whether he had foreign accounts and the fact that Schedule B, Question Seven was marked “No.”
Therefore, under these facts it would seem unlikely for Denise to qualify for either streamlined program or reasonable cause.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.