Can I Talk to a CPA About My Undisclosed Offshore Assets?

Can I Talk to a CPA About My Undisclosed Offshore Assets?

Can I Talk to a CPA About My Undisclosed Offshore Assets?

When U.S. Taxpayers across the globe learn that they are out of compliance with the IRS and FinCEN for failing to report their foreign accounts, assets, investments, trusts, or entities, oftentimes their immediate knee-jerk reaction is to reach out to an accountant or CPA. While some accountants or CPAs may be effective in preparing tax documents, it is important to note that there is no attorney-client privilege between a Taxpayer and an accountant or CPA for legal issues such as offshore disclosure and reporting. Therefore, by having substantive communications with a non-attorney regarding offshore tax and reporting matters, those conversations and communications may be discoverable by the IRS. And, while there is some privilege with an accountant, the privilege is much more limited and not the same as the privilege with an attorney. That is why Taxpayers should be cautious before providing information that would otherwise be privileged with an attorney to a non-attorney such as a CPA or an accountant.

Late FBAR Attorney-Client Privilege

When a Taxpayer communicates with an attorney, the attorney-client privilege will attach to those communications. For example, if a Taxpayer reaches out to an attorney and has questions about the legalities of failing to report foreign accounts and assets — those communications with the attorney would be privileged. If the communications are privileged, then the IRS and other government authorities are not able to obtain that communication unless the Taxpayer waives the privilege — or unless the communication reflects an intent to seriously harm or injure another person. Thus, Taxpayers must be cautious in speaking with a non-attorney regarding a matter such as delinquent FBAR reporting.

What is the Accountant-Client Privilege for Delinquent FBAR?

Under Title 26 of the U.S. Code, there is a limited privilege between a Taxpayer and an accountant. It is very important to note that these communications do not extend to anything criminal, and they are not protected in the same way that the attorney-client privilege is protected. While most attorney-client communications are privileged — and nearly ironclad, when the communication is with an accountant the protection is much more limited. If the Taxpayer finds himself in a criminal investigation a quasi-criminal investigation and even some civil investigations, the information provided to the accountant or CPA can be discovered by the IRS and other government authorities – even if the accountant or CPA claimed it was ‘confidential or privileged.’

Privilege Agreements Between Accountants and Attorneys are Limited

Some CPAs and accountants will try to goad an unsuspecting Taxpayer into providing information to them to try to bait the client into hiring them instead of an attorney by claiming they can just go get a Kovel Agreement or Kovel Letter from an attorney. It is very important to note that Kovel is not statutory law and only applies in certain situations. In addition, a Kovel Agreement/Letter is primarily applicable in situations in which the attorney requires an accountant to assist with accounting activities that the attorney is not knowledgeable in. That is not the same as a Taxpayer speaking with an accountant or CPA about a delinquent FBAR, foreign trust, foreign entity, etc.

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.