A Voluntary Disclosure Placeholder with the IRS is Not a Good Plan
We get it. You know that you were supposed to be reporting all of your foreign income, assets, accounts, investments with the IRS each year.
Maybe you knew and didn’t care (until now), or maybe you learned a few years ago (but were too nervous to come forward).
Either way, at some point you became willful, or acted with reckless disregard, and have come to the realization that while voluntary disclosure is not ideal — it beats worrying about a criminal investigation down the line.
You’ve been scared to death by other attorneys regarding the nature, extent and penalties associated with various acronyms such as FBAR, FATCA, PFIC, CFC, etc.
So now — you just can’t wait to get into compliance.
Do NOT File a Place Holder Submission
Unfortunately, you originally selected an attorney who did not have the experience he or she said they did.
They went ahead and ordered your financial statements from the banks or investment firms before knowing whether you have been accepted into the program (possibly tipping off the IRS) and are way over their head in trying to handle your voluntary disclosure.
And, the disclosure preparation process may be taking longer than the Attorney originally anticipated (because you are one of the first ones they are handling) — and maybe you are getting a bit antsy…
A Bad Strategy by Inexperienced Counsel
The Attorney tells you that he or she will go ahead and submit a letter to the IRS telling the IRS that you plan on getting into compliance, and if the IRS could please just hold off on issuing any penalties in the meantime.
This puts your mind at ease, but is actually opening up a huge can of worms.
That type of plan is equivalent to walking into the police station (when they may literally have no idea you committed a violation) and telling them that you committed a crime – but that you’re not really ready yet to submit to the police just yet, because you want to get everything in order first so that when the police come find you come you have all your ducks in a row, and so you can first arm yourself with an attorney to protect you from the investigation…
…but that you really, really promise to get into compliance soon.
Voluntary Disclosure is Complex
Voluntary Disclosure is much more complex than most Attorneys who do not practice in this area regularly would realize. And, just because a newer attorney has handled a handful of “Streamlined Cases” while practicing five other areas of tax does not make them experienced in voluntary disclosure.
The IRS has no reason to believe a person who is out of compliance will plan on getting into compliance (no matter what you tell them).
Moreover, since offshore and foreign penalties are some of the highest penalties issued by the IRS, it is safe to say that tipping off the IRS and “snitching” on yourself is a bad idea.
Use Experienced Voluntary Disclosure Counsel
When you retain a Voluntary Disclosure firm, you want to make absolutely sure that you are using a firm that is going to take care of your submission from beginning-to-end.
All too often, clients come to us after they’ve gone to a less experienced attorney who got them into a worse situation with the IRS than they were in when they first started.
This usually happens when the client retains a general tax firm, in which the client is at the mercy of whichever CPA the firm uses — who is usually a staff CPA or inexperienced outside CPA that is completely overworked, and trying to juggle 10 different areas of tax law, and does not have the experience in International Tax to properly prepare your returns — and who does not make your case a priority.
We Specialize in Safely Disclosing Foreign Money
We have successfully handled a diverse range of IRS Voluntary Disclosure and International Tax Investigation/Examination cases involving FBAR, FATCA, and high-stakes matters for clients around the globe.
Contact us today; let us help you.
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. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.