- 1 Do I Go to Court for Offshore Voluntary Disclosure?
- 2 Is it a Criminal Proceeding?
- 3 Is there a Plea Agreement?
- 4 Do I Have to Go to Court?
- 5 What if I Disagree with the Penalty?
- 6 If I Drop Out and Ghost the IRS?
- 7 Criminal Enforcement
- 8 Current Year vs Prior Year Non-Compliance
- 9 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 10 Golding & Golding: About Our International Tax Law Firm
Do I Go to Court for Offshore Voluntary Disclosure?
When a US taxpayer needs to get into compliance for undisclosed offshore accounts, assets, investments, and income but does not qualify as non-willful, they are not eligible to submit to the Streamlined Procedures, Delinquency Procedures, or Reasonable Cause. Rather, they are limited to submitting under the IRS Voluntary Disclosure Program (VDP) if they are seeking to make a voluntary disclosure of their unreported foreign money to the US Government. Golding and Golding has successfully represented thousands of taxpayers in all aspects of voluntary disclosure – both willful and non-willful. Recently, we have been finding that taxpayers are being led astray about the nature of the VDP program and how the process works. Let’s take a walk through six important facts about voluntary disclosure (VDP):
Is it a Criminal Proceeding?
No. The voluntary disclosure program is not a criminal proceeding. It is a civil agreement between the taxpayer and the IRS in which the taxpayer agrees to pay a penalty in exchange for the IRS entering into a closing letter Form 906 resolving the matter. While the Criminal Investigation Department (CID) may conduct an initial background check, it is not a criminal matter.
Is there a Plea Agreement?
No. Since there is no criminal proceeding taking place, there is no plea agreement. Rather, the taxpayer enters into a civil agreement with the IRS (Letter 906), in which they agree to file late forms and pay taxes, interest, and penalties in exchange for the IRS closing the matter.
Do I Have to Go to Court?
No, the procedures for the voluntary disclosure program do not require taxpayers to go to court. Rather, the majority of the submission involves preparing and filing documents with the IRS and negotiating with the agent. Your attorney will communicate with the IRS Agent/Officer throughout the process as well. Under the revised procedures, taxpayers are required to undergo an audit by the agent. Most audits are relatively straightforward and non-stressful. Some agents agree to forego the audit as well — or limit it to additional written IDRs.
What if I Disagree with the Penalty?
Unlike the Streamlined Procedures, if you disagree with the VDP penalty you have the opportunity to challenge the penalty. Throughout the submission process, you have the ability to negotiate with the agent — although under the revised procedures the agents are relatively limited in their ability to negotiate. Even if the Agent may want to reduce the penalty, they must first receive approval from management or supervisor. In order to keep the process and outcomes consistent, most of the time taxpayers are subject to the penalty set forth in the updated memorandum.
If I Drop Out and Ghost the IRS?
Nobody likes to be ghosted — and that includes the IRS. If you drop out of the program and no longer respond to the IRS, they can pursue civil enforcement, including filing a lawsuit. And, if they believe that the matter is criminal, they could refer the matter to the IRS Special Agents for possible criminal enforcement. The chance of this is extremely rare.
If the IRS believes that the taxpayer acted criminally and the taxpayer does not fully cooperate with the IRS, of course, this may lead the IRS to pursue a criminal investigation against the taxpayer which can lead to criminal prosecution. If you believe that you have no intention of actually completing the program once you submit, you may want to consider retaining a Board-Certified Criminal Law Specialist who specializes exclusively in criminal litigation, instead of a Board-Certified Tax Law Specialist who specializes in offshore disclosure — and develop an alternative strategy in lieu of submitting to the voluntary disclosure program.
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 that 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 of the Streamlined Procedures. 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.
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.