Domestic Voluntary Disclosures, Why?

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Since 2009 there have been three offshore voluntary disclosure programs offered by the IRS. The major difference among the three programs is the FBAR penalty, known as the civil miscellaneous penalty. The penalty has graduated between the three programs 2009, 2011 and 2012 from 20% to 27.5% of the highest single year financial account balance plus the total of other Tax non-compliance assets. Tax non-compliance assets are unreported offshore bank and financial accounts and the assets acquired with those funds, like real estate, business interests, and art. But the voluntary disclosure program is not limited to FBAR issues. In fact there has be a long standing domestic voluntary disclosure program.

The domestic voluntary disclosure program has now taken on some of the centralized features of the offshore programs, in that there is a prototype letter that is to be sent to the Criminal Investigation office in Philadelphia. Domestic disclosures are subject to the same pre-clearance process as offshore disclosures and often are combined in offshore filings. For taxpayer’s who do not have offshore account issues, or other offshore information returns, (like controlled foreign corporation returns, or a Report of Foreign Gift, Devise or Bequest), a domestic voluntary disclosure may be their best alternative to playing “hide and seek” with the IRS while hoping not to be charged with tax evasion.

A domestic voluntary disclosure should be considered when a taxpayer has engaged in willful conduct that may give rise to criminal prosecution or assertion of the 75% fraud penalty. Such conduct may include, willful and knowing false statements on a tax return, including under reporting income, or overstating deductions, and money laundering. A fiduciary, like a trustee or executor or conservator should consider making a voluntary disclosure when past problematic conduct is discovered.

A domestic voluntary disclosure, when used properly can be a powerful tool to cure past wrongs at a reasonable cost, which is generally far less than waiting incarceration.

 

Topics:  FBAR, IRS, OVDP, Penalties, Voluntary Disclosure

Published In: Criminal Law Updates, Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sanford Millar, Law Offices of Sanford I. Millar | Attorney Advertising

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Sanford Millar
Law Offices of Sanford I. Millar

Experience and Qualifications: Over 30 years of experience in domestic and international tax... View Profile »


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