Contents
- 1 Does Voluntary Disclosure To Protect Against Criminal Prosecution?
- 2 Non-Willfulness vs Willfulness
- 3 Taxpayers Must Make a Full Voluntary Disclosure
- 4 Legally Sourced Money vs. Money Laundering
- 5 Extent of Offshore Assets for Voluntary Disclosure
- 6 Civil Tax Fraud has No Statute of Limitations
- 7 Late Filing Penalties May Be Reduced or Avoided
- 8 Current Year vs. Prior Year Non-Compliance
- 9 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 10 Need Help Finding an Experienced Offshore Tax Attorney?
- 11 Golding & Golding: About Our International Tax Law Firm
Does Voluntary Disclosure To Protect Against Criminal Prosecution?
In the world of IRS Offshore Voluntary Disclosure, it is well-established that the VDP procedure is a very good option for U.S. Taxpayers who may have committed a criminal tax violation because the program can minimize and ultimately eliminate the risk of the IRS/DOJ pursuing a criminal prosecution against the Taxpayer. The purpose of the IRS Voluntary Disclosure Program is to bring Taxpayers into compliance voluntarily without the fear of criminal enforcement. That is because if the IRS were to entice Taxpayers into making a voluntary disclosure, only to turn around and prosecute them — the program would have failed many years ago. To help better understand how Voluntary Disclosure works in matters involving offshore income, accounts, investments, and assets, we will summarize some of the more important considerations when deciding if the Voluntary Disclosure Program is right for you.
*Golding & Golding previously published the How Voluntary Disclosure can Minimize Criminal Tax Exposure article back in 2021 and has since updated the article.
Non-Willfulness vs Willfulness
If a Taxpayer cannot certify non-willfulness, then a Taxpayer does not qualify for any non-willful offshore disclosure procedures — such as the Streamlined Procedures; Delinquency Procedures, or Reasonable Cause. Moreover, the longer a Taxpayer knowingly/willfully remains non-compliant, the bigger risk they are taking for higher penalties — that is because if a taxpayer finds himself under audit, then he is no longer eligible for VDP.
Taxpayers Must Make a Full Voluntary Disclosure
The IRS Voluntary Disclosure Program requires the Taxpayer to make a full disclosure. While this does not require the Taxpayer to atone for every tax sin they have ever made in their lifetime, the Taxpayer is required to make a full disclosure for the VDP compliance period.
Legally Sourced Money vs. Money Laundering
If the money was obtained illegally (illegal gambling or narcotics for example), then the Taxpayer is ineligible for VDP. This is because the IRS will not allow a Taxpayer to clean dirty money by running it through the Voluntary Disclosure Program.
Extent of Offshore Assets for Voluntary Disclosure
In general, the more offshore assets a Taxpayer has, the higher the likelihood that one of the foreign financial institutions will report the Taxpayer to the U.S. Government (FATCA). If the IRS learns about the noncompliance before the applicant submits to the program — the Taxpayer loses the opportunity to submit to the program.
Civil Tax Fraud has No Statute of Limitations
In addition to criminal prosecution, the IRS can also pursue a civil fraud investigation and willful FBAR penalties over multiple years, which can exceed the penalties issued under VDP (which is limited to one fraud penalty and one FBAR/FATCA penalty). Also, with IRS Voluntary Disclosure, the IRS limits offshore non-compliance to 6-years.
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.