Offshore Voluntary Disclosure

If you are a United States citizen that either currently or once had money in a foreign bank account, take note. Are you familiar with the FBAR Form 114, once known as the TDF 9-22.1? If you’ve ever had a bank account abroad and did not report it with the Offshore Voluntary Disclosure Initiative (OVDI), using the IRS Foreign Bank Account Report (FBAR) form, Contact Gordon Law to schedule a consultation immediately after reading this article.

Tax Law Made Easy

Like personal and business income tax filing, IRS forms, regulations, and processes can be extremely complex to understand. The OVDI can be even more complex to file, especially considering tax obligations you might already have for assets within the borders of the county in which the assets are housed. This is why, if you have a foreign asset, you should seek the assistance of an experienced Chicago OVDI lawyer to help you mitigate problems before they even come about.

The FBAR Disclosure

The FBAR is a required disclosure form that must be filed by all U.S. citizens with foreign bank accounts regardless of whether they yielded any dividends or earned any interest or not.

The FBAR is administered as part of the Offshore Voluntary Disclosure Program (OVDP).

When it was instituted in 2011, the IRS intended to have it exist for only a short period. However, the OVDP has been in effect four years already with no prospect of an end in sight.

The IRS requires any American with ownership rights or any fiduciary interest in a foreign asset, be it real property or a banking account, to file the FBAR form, provided it meets specific balance or value limits. Foreign bank accounts that have had a balance of $10,000 at any point during a calendar year require one to file. Stiff penalties exist for not doing so.

These include:

  • Being labeled a felon
  • Being subject to a fine of $250,000
  • Spending five years in federal prison

Furthermore, voluntarily failing to file said form is subject to a fine of $100,000 or 50% of the account balance. 

Changing Requirements

In the years since it has come into existence, the US government has been lenient on prosecuting these types of cases. It has allowed foreign asset holders who file an FBAR and become compliant with the Offshore Voluntary Disclosure Program not to be pursued on criminal tax evasion charges. It has also allowed once non-compliant American citizens to be assessed more standardized monetary penalties for their largely unintentional oversight.

Whereas in the past, a taxpayer that had neglected to pay for several years would receive nothing more than essentially a slap on the wrist, things have changed. Failing to file taxes over the course of several years does not guarantee the same post-amnesty. Post-amnesty, fines for failing to pay are waged—as well as penalties assessed up to 27.5%. Moreover, if you are found guilty of knowingly evading filing, criminal charges might also be waged against you. Voluntarily failing to comply with the OVDP is still frequently punished by incarceration.

Receiving Amnesty

For those who have foreign investments and assets that are not in compliance, there is a more standardized process for becoming amnestied under the OVDP. The procedure for inclusion includes filing all original, as well as amended, federal income tax returns for the time frame in which foreign assets should have been disclosed on the voluntary FBAR. Amended returns must then be filed for each of those same years, reflecting the inclusion of all domestic and foreign-sourced income, assets, and investments. This information should all be contained on the FBAR for each of the years that it was not filed.

After submitting those documents, you’ll most likely be contacted a Chicago IRS auditor from the IRS Criminal Investigation Unit. You will be advised of the strict penalties they can levy should you not choose to cooperate with their investigation. They will, in many cases, neglect to mention your prospect of amnesty from prosecution and the potential for reduced fines if you are forthcoming with the documentation they request. Because certain admissions to IRS investigators can result in uncovering more improprieties, being represented by an experienced Chicago tax attorney and expert on the Offshore Voluntary Disclosure Program is critical.

Good Accounting Is Not Enough

A Certified Public Accountant or Bookkeeper does not suffice for representation in such cases. In fact, bookkeepers and CPAs are routinely used against their clients because of their lack of immunity from testifying in cases involving criminal tax investigations and prosecutions. At the Gordon Law Group, our Chicago tax lawyers have significant experience working with IRS officials on back taxes and foreign asset ownership.

Considering the complexities already involved in filing both personal and corporate taxes with all the different forms, deductions, tabulations, etc., the risk is simply not worth it. You can protect yourself by seeking out the assistance of counsel who is affiliated with CPAs and IRS regulators, who know the latest regulations, and who can help you avoid an audit at all costs. This strategic relationship can be critical in piecing together financial data necessary to see an end put to a Chicago IRS audit as swiftly as possible.

To assist our clients who are expats or have investments abroad, Gordon Law Group offers an Offshore Voluntary Disclosure Program FBAR filing option.

We can help you annually in making sure your documents are filed according to the latest regulatory standards. Additionally, if you’ve never filed, we can help you file the necessary amended returns as required by the Offshore Voluntary Disclosure Program, to bring you into complete compliance. We also can advise you as to your potential for opting out of reporting at all.

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