Voluntary Disclosure of Offshore Assets

IRS Offshore Accounts Discovery Efforts

The IRS is ramping up their efforts to discover the names of individuals that are hiding money offshore. The Service has been aggressive in seeking information from foreign financial institutions about clients who are U.S. taxpayers and might be evading U.S. taxation. As the IRS amasses more and more information about off shore bank accounts, the risk to individuals who hold offshore assets is increasing.

Voluntary Offshore Disclosure

There may be some salvation, as the IRS has rolled out a new offshore voluntary disclosure initiative to allow taxpayers with foreign assets to self report without risking massive civil penalties or possible criminal sanctions. The deadline for participating in the IRS‘s 2011 voluntary disclosure program is August 31, 2011.

Participants who are accepted into the 2011 program will not be criminally prosecuted and are only subject to a 25% (12.5% in some circumstances) penalty, the accuracy related penalty, and the failure to file and pay penalties under IRC sections 6651(a) and (b) respectively. Participants will not be subject to the foreign bank accounts and financial account report (FBAR) penalty, the civil fraud penalty, and other offshore related return penalties. The FBAR penalty could be as high as 50% of the balance in the foreign bank account and the civil fraud penalty as high as 75% of the undisclosed income.

The voluntary disclosure program is based upon taxes that date back to 2003 and nothing before that. Taxpayers who held foreign assets before that date and voluntarily disclose will not be subject to taxation from the years prior to 2003. Those taxpayers that do not voluntarily disclose their offshore information could be subject to tax and penalties for years prior to 2003.

The need for Legal Counsel while Voluntarily Disclosing Offshore Information

A taxpayer should not make a voluntary disclosure without legal representation. Whenever a taxpayer provides information to the IRS anything they say can and may be used against them in a court of law. A tax attorney will speak on behalf of the taxpayer, thereby insulating the taxpayer from direct contact with the Internal Revenue Service. A tax attorney will also obtain pre-clearance from the IRS‘s criminal investigation division before making any disclosures and then work to ensure they are within the pre-clearance parameters.

Teogatha Law represents clients who hold offshore assets and wish to voluntarily make a disclosure to the IRS. We ensure confidentiality by using an encrypted messaging system designed to prevent hackers from learning the content of the transmissions. If an accountant‘s services are needed, Teogatha Law will retain the accountant on behalf of the client thereby extending the attorney-client privilege to the accountant.