What is the IRS Offshore Voluntary Disclosure Program?

Allen Barron, Inc.

What is the IRS Offshore Voluntary Disclosure Program and who is it designed to help? What are the guidelines for voluntary disclosure to the IRS and who is eligible to apply?

The IRS Offshore Voluntary Disclosure Program is designed for US taxpayers who have not made a full disclosure of their offshore financial accounts, investments and assets and as a result face a substantial risk of criminal prosecution for tax evasion and other intentional tax crimes. The program offers the taxpayer potential protections from criminal prosecution in exchange for making a full disclosure and bringing all tax filings current, as well as paying all associated taxes, interest, penalties and fines.

The IRS Offshore Voluntary Disclosure Program is not a guaranteed “get out of jail free” card and does not confer any immunity to the US taxpayer for tax crimes they may or may not have committed. It simply provides IRS investigator(s) with additional “guidance” as they determine whether or not to recommend criminal prosecution. In short, the IRS doesn’t have the resources to pursue, investigate and criminally prosecute every US taxpayer who attempts to evade taxes. The disclosure is one factor among many that the investigation will consider.

The goal is to make a “truthful, timely and complete” disclosure to the IRS and cooperate with the agency to determine resulting tax liabilities and how the resulting taxes, interest, penalties and fines will be paid in full. In essence, good faith, cooperation and full payment go a long way with the IRS.

The IRS Offshore Voluntary Disclosure Program is designed to help US taxpayers who have willfully attempted to hide income or assets and/or evade paying taxes, but are not yet under IRS audit or investigation. It is not for those who have been or are presently involved in a criminal enterprise. The IRS is not about to help anyone to launder illegally gained money or assets. The program is designed to provide an opportunity for US taxpayers to substantially reduce the likelihood of criminal prosecution for willful tax avoidance while coming into full compliance with their IRS tax reporting obligations.

The IRS Offshore Voluntary Disclosure Program is not intended for US taxpayers who have unintentionally missed some information or inadvertently provided inaccurate or incomplete information. “Non-willful” actions by a US taxpayer should be corrected, to be sure. Other options for coming into compliance with the IRS might include a “quiet disclosure” (simply filing amended returns) or a submission under the IRS streamlined procedures. Which option is best for your unique circumstances?

This is why it is important to consult with an experienced tax attorney if you have undisclosed offshore financial accounts, investments and/or assets. Ask about the protections of the attorney-client privilege and learn more about the genuine risks you face as well as the various options to come into compliance. Your tax attorney can provide sound advice and counsel and work with you to update past returns and complete the submissions necessary to mitigate any financial and/or criminal exposure(s) you face.

The IRS is receiving electronic information from banks, investment houses, financial institutions, tax agencies and even cryptocurrency exchanges around the world. It is much easier (and an automated process) to compare information received by the IRS from these global sources with the information on a taxpayer’s returns to identify potential audit targets or potential criminal tax evasion.

It isn’t a matter of “if” the IRS will find out about your offshore activities, it is a matter of “when.” If the IRS comes after you through an audit or a criminal investigation your options are greatly diminished, and your financial and potential criminal exposure substantially increases.

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.

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Allen Barron, Inc.

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