The Offshore Voluntary Disclosure Practice provides taxpayers who have exposure to civil and criminal penalties with a way to resolve their tax problems for a low civil penalty. Adhering to the IRS Voluntary Disclosure requirements protects these individuals from criminal liability.
The IRS has significantly increased enforcement of the laws requiring reporting of foreign financial accounts and assets. McMahon & Tivnan, PC has represented hundreds of taxpayers to resolve their foreign asset and income reporting problems. Penalties in this area can be significant and new laws will make concealing such accounts more difficult. The IRS’s current voluntary disclosure program allows taxpayers to come into compliance and pay a smaller penalty than otherwise possible.
Increased Foreign Reporting and Enforcement
The Foreign Account Tax Compliance Act (“FATCA”) increased the requirements for United States taxpayers to report foreign assets including foreign financial accounts. FATCA also applies to financial institutions worldwide requiring them to report customer financial information to the IRS. The updated voluntary disclosure program is available for executors, trustees, and business entities as well as individuals.
Should I Use the IRS Voluntary Disclosure Program?
Voluntary disclosure consists of a taxpayer providing timely and truthful information to the IRS. Once formally declared, the taxpayer agrees to cooperate with the IRS to determine the correct tax and penalty liabilities and arrange payment. Accurately stating undisclosed income is required to reduce liabilities and prevent possible prosecution.
At McMahon & Tivnan, PC, we resolve problems with foreign income and asset reporting. The IRS voluntary disclosure practice allows people to resolve tax issues with previously undisclosed income. Our Boston firm has the experience and knowledge to help taxpayers navigate the process to ensure compliance and avoid civil and criminal penalties.
The IRS has two methods for reporting previously unreported offshore assets. It is vital to choose the correct option for your situation. The consequence of selecting the wrong method may result in significant civil penalties and possible criminal charges. Our lawyers will assess your circumstance to assist you with choosing the correct approach to resolve your situation.
Understanding the Process
It is crucial for U.S. taxpayers who own foreign assets or have foreign investments to understand whether and how they are required to disclose those foreign assets and income to the IRS. The IRS’s current options for resolving underreported foreign assets are intended only for taxpayers who were negligent and are not available for taxpayers whose non-compliance was willful or criminal.
U.S. taxpayers with previously unreported foreign income or assets due to negligent or non-willful conduct have two primary filing options:
- Streamlined Offshore Voluntary Disclosure Practice (“Streamlined OVDP”): This program protects taxpayers from criminal liability and is available to people who failed to timely or completely declare foreign financial assets or income due to negligence or other non-willful conduct. The Streamlined OVDP substitutes a lower penalty for higher statutory penalties that would otherwise apply. For taxpayers who reside outside of the United States there is no penalty.
- Delinquent International Information Return Filing Procedure: This option can avoid all penalties, but the taxpayer must meet the IRS’s reasonable cause standard for the non-compliance.
Neither of these options are available to those who are under IRS examination or who do not meet other the requirements for the respective methods.
Criminal Investigation and IRS Voluntary Disclosure
Individuals or businesses concerned that their reporting failures are due to willful conduct should consider participating in the IRS’s general Voluntary Disclosure Practice. It is best to see professional legal advice from knowledgeable, experienced attorneys before deciding whether to begin the process. A voluntary disclosure agreement can avoid tax penalties and prosecution.
Tax attorneys can help determine if a taxpayer qualifies for an IRS voluntary disclosure practice. We are available for a privileged and confidential review of your situation, the available options and to help choose the method appropriate for your circumstance.
Reasons to Choose McMahon & Tivnan Tax Attorneys
Any taxpayer who believes they may have a foreign asset reporting compliance problem should contact us immediately. The rules governing the IRS Offshore Voluntary Disclosure Practice have been and may be revised at any time.
With several available options for declaring undisclosed foreign accounts, it is best to consult with a tax attorney who knows the complexities of your circumstance and the U.S. tax laws. It is crucial to select the correct method to avoid fines and criminal charges.
Reporting undisclosed offshore accounts to the IRS involves various factors. We have an extensive background working to settle tax disputes and specialize in tax controversy. Our comprehensive understanding of tax laws, rules, and regulations ensure sound legal representation for complex situations.
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