When You Realize Your OVDP or Streamlined Lawyer Is Inexperienced
Unfortunately, in recent months we have been approached by many clients who are dissatisfied with their current offshore disclosure lawyer.
Whether it is because the firm represents (aka advertises) OVDP and Streamlined Program representation, but really has no background in the area of law or it is because the firm is charging hourly fees instead of flat fee and the attorneys fees are piling up, you do have options.
Use an Attorney
The first and most important issue is to understand that your best option is to choose an attorney vs. a “Tax Practitioner.” Only with an attorney do you obtain the benefit of the attorney-client privilege. By using a CPA or Enrolled Agent, they may have solid tax knowledge, but without the attorney-client privilege than anything you tell these individuals may not be considered confidential or private to the US government; in other words, the representative that you place your confidence in maybe forced to testify against you.
Does Your Attorney Know the Basics of International Tax?
The majority of firms that are experienced in this area of law limit their practice. Why? Because there are many facets to offshore disclosure that most attorneys we do not handle this area of law do not even know to look for. For example:
- How do you report form retirement funds?
- How do you report foreign provident funds?
- Did they file your FBAR for the current year timely?
- Do they know the difference between and 8938 and FBAR?
- Do they understand how the IRS classifies PFIC?
- Do they know how to complete form 8621?
- Are they aware of which foreign entities are de facto U.S. corporations?
- Do they understand how foreign real estate is impacted in OVDP vs Streamlined?
- Do they understand how a disregarded entity may impact the Penalty Structure?
- Do they understand how your immigration status may impact your application?
In other words, there are many different factors that may impact an offshore disclosure application. All too often, we have a client come to us from another firm who has lost confidence in their attorney. They tell us their former attorney told them they were “low risk” and should definitely do the streamlined program. This is before the attorney or other tax representative properly vetted out the background information from the client.
Why is this So Important?
Because you only get one shot. In other words, once you submit to the streamlined program you do not have the opportunity to withdraw your application and then submit to OVDP; it is a one-shot deal. Therefore, it really is very important that you speak with an experienced offshore disclosure lawyer before making any decisions.
Flat-Fee vs. Hourly
Offshore disclosure is the type of matter that can get very expensive, very quickly. More often than not, this is because the attorney you hired has no background (or very little) in international tax and is essentially using your money to learn the area of law.
These attorneys take any tax matter that walks through the door and if it happens to be your offshore disclosure matter, so be it. Therefore, it is crucial that if you’re going to submit to offshore disclosure that you hire firm that quotes you a flat fee. Most experienced firms in this area of law are willing to quote you a flat fee because that handled numerous disclosures and are aware of what it takes to get your matter done.
I am so Overwhelmed, Where do I Start?
We get it. It is very overwhelming to learn that you may have been out of IRS tax compliance for many years and after reading various blog postings from fear monger attorneys online, you are scared.
There is nothing to be scared about: if you are non-willful you qualify for the Streamlined Disclosure Program or possibly FBAR delinquency depending on the facts and circumstances of your case. Alternatively, if you knew what you are doing and now you’re afraid that you’re going to get caught you simply submit to OVDP (which is designed for individuals and businesses who were willful), pay the penalty or opt out and go on with your life.
Golding & Golding Can Help You!
While being out of compliance the overwhelming and downright scary, we can assist you get you back into compliance quickly. Golding & Golding is a law firm dedicated exclusively to offshore disclosure. We represented hundreds of clients in more than 40 countries with offshore disclosures ranging from $50,000 to nearly 40 million in a single disclosure.
The following is the first step, basic summary of offshore disclosure and what your responsibility/options may be:
Golding & Golding is a flat-fee, full-service firm; we are lawyers who assist international clients in reporting their offshore accounts to the IRS. Most recently, many of our clients learned about Foreign Bank Account reporting requirements when they received a FATCA Letter from their Bank, asking them to certify their U.S. Status by submitting either a W-9 or W-8 BEN.
Who Has to Report?
We have represented numerous clients worldwide with issues similar to yours:
– Expats who relocated overseas and did not know they had to report their foreign accounts.
– U.S. Citizens who live overseas and may or may not earn significant income, but have accounts in a foreign country.
– Legal Permanent Residents of the United States who relocate back to a foreign country but are unaware that they are still required to report the foreign accounts.
– Non-Residents who meet the substantial presence test and therefore are required to report foreign bank and other accounts to the US government.
Please do not worry. We can assist you as we have assisted hundreds of clients in over 40 countries disclose upwards of $40 million in a single disclosure.
We are available seven days a week and provide flat-fee and full-service representation to our clients around the world.
These are the most basic rules when it comes to foreign accounts and foreign income:
If you are either a US Citizen, Legal Permanent Resident (aka Green Card holder or recently gave up your Green Card) or foreign resident who meets the substantial presence test, then you are required to report your worldwide income to the IRS. This means that even if you do not have any US-based income, you are still required to report your worldwide income (even if it is the type of income which is not taxed in your home country such as interest and dividend income in most Asian countries). And, if you have enough foreign income to meet the minimum threshold for having to file a US tax return, then you are required to do so even if it is based on your foreign income alone.
If you meet the requirement for being a U.S. “Taxpayer” (even if you do not meet the threshold for having to file a US tax return), you are still required to file an annual FBAR (Report of Foreign Bank and Financial Accounts). The threshold is as follows: if at any time during the year, you have more than $10,000 in foreign accounts (whether the money is in one account or spread over numerous accounts), you are required to file an FBAR.
In addition, if you have significant amounts of money overseas, then you may also have to file additional forms such as an 8938 (FATCA Form) or 8621 (Passive Foreign Investment Company, which includes Foreign Mutual Funds along with as many other passive investments). There are many other forms you may have to file, but we determine those on a case-by-case basis.
Fines & Penalties
Unless you are criminal, chances are the IRS or Department of Justice will not be banging down your door to come drag you to jail. With that said, the fines and penalties can be very steep and depending on your particular circumstances, may include penalties upwards of 100% of the value of your foreign account. If the IRS believes you were willful (aka intentional), then they may launch a criminal investigation against you and the penalties and fines can get much worse from here, including Liens, Levies, Seizures…and worse.
Customs Holds and Passport Revocation
With the implementation of FATCA (Foreign Account Tax Compliance Act), the United States is heavily cracking down on offshore tax evasion and unreported foreign accounts in general. The IRS and US government have the power to both revoke your passport as well as possibly hold you at the airport “customs hold” to question you on the spot (usually outside the presence of your attorney).
Getting Into Compliance
Getting into compliance should be mandatory on your “to-do” list. Even though our firm, Golding & Golding, is based in Newport Beach, we represent clients worldwide. A majority of our clients live overseas in over 40 countries. We have helped numerous clients get into compliance and are regarded as one of the top Offshore Disclosure Law Firms worldwide.
To that end, there are three main methods of compliance:
(1) Streamlined Compliance
This program is for individuals who were unaware of any requirement to file an FBAR and/or report their income on a US tax return. The penalties under the streamlined program are significantly reduced and may possibly be waived depending on whether a person qualifies under the strict definition of foreign resident for offshore disclosure purposes.
This program is mainly for individuals and businesses who were willful, aka were aware they were supposed to report their foreign accounts but intentionally hid or kept the account/income information secret.
(3) Reasonable Cause Statement
This is not a particular program; instead, it is a method for getting to compliance while attempting to avoid any penalty. There are many pros and cons to this method depending on your specific situation, which must be evaluated carefully with your attorney before making a decision.