What Happens If You Haven’t Filed These Forms?

There are options to file delinquent forms that could be easier and less financially painful than you think. The IRS has been given large weapons by Congress with an array of huge delinquency penalties, but instead of waving them around wildly, causing noncompliant taxpayers to dive for cover, the IRS would rather coax taxpayers into compliance using the carrot approach. We will briefly explain three programs the IRS currently offers to help taxpayers get caught up: 1) streamlined filing procedures, 2) delinquent FBAR submission procedures, and 3) delinquent international information return submission procedures. For additional information, see Options Available for U.S. Taxpayers with Undisclosed Foreign Financial Assets.

Streamlined Filing Compliance Procedures

The IRS created the original streamlined procedure in 2012. This program was offered only to taxpayers living outside the United States who qualified for the foreign earned income exclusion. It was further restricted to taxpayers with unreported income of $1,500 or less.

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Continued from Part I

The Risks Associated With Making A Quiet Disclosure

What happens if the IRS disagrees with Joan, Tommy, or Trevor’s explanation for filing late FBARs? In other words, what if the IRS believes that their failure to file FBARs was not inadvertent or accidental, but instead willful?

This could result in any one of a number of “parade of horribles,” the most serious of which is a referral to Criminal Investigation. While that is generally the exception and not the rule, taxpayers should be mindful of the fact that, unlike OVDP, a “quiet disclosure” does not guarantee immunity from prosecution. Read More

The environment that taxpayers with unreported offshore bank accounts find themselves in today is downright frightening. Some have likened it to “McCarthyism,” the term that has its origins in the period of U.S. history known as the “Second Red Scare.” Beginning in 1950 and lasting until 1956, “McCarthyism” was characterized by heightened political repression against communists, as well as a campaign spreading fear of their influence on American institutions and of espionage by Soviet agents.

Originally coined to criticize the anti-communist pursuits of Republican U.S. Senator Joseph McCarthy (Wisconsin), “McCarthyism” soon took on a broader meaning. The term is now used more generally to describe reckless, unsubstantiated accusations, as well as demonized attacks on the character or patriotism of political adversaries. Read More

On June 18, 2014, the IRS announced major changes in its offshore voluntary compliance programs. The changes include an expansion of the streamlined filing compliance procedures and key modifications to the 2012 Offshore Voluntary Disclosure Program (OVDP).

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. The modifications to the existing OVDP program provide, in part, for an increased offshore penalty from 27.5% to 50% in certain circumstances.

Options for U.S. Taxpayers with Undisclosed Foreign Accounts

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