Life isn’t fair. Neither is the IRS’s most recent settlement initiative designed to entice taxpayers to proactively resolve their international tax non-compliance, such as failing to report foreign income, foreign accounts, foreign entities, etc. In both instances, some people win and some people lose, often with little or no regard to what is equitable. Among those basking in the benefits of favored status lately are certain Canadians, residing either in the United States or the homeland, who have neglected their tax-related obligations with Uncle Sam. Indeed, thanks to recent modifications to the offshore voluntary disclosure program (“OVDP”) and the introduction of a special “streamline procedure” for select expatriates, many Canadians are able to resolve their tax transgressions on terms vastly superior to those applicable to the masses. This is particularly true for persons with specific types of Canadian retirement plans. The article, “IRS Introduces Two Unique Remedies for U.S. Persons with Unreported Canadian Retirement Plans and Accounts,” which was published in the most recent edition of the International Tax Journal, analyzes the unique options available to Canadians.
Posted tagged ‘OVDI’
Detection Risk Continues To Grow As The IRS Expands Its Offshore Bank Account Investigation Into Liechtenstein
June 12, 2012By: Dustin Covello
Late late year, we asked what’s next for foreign bank account holders after OVDI? Although the answer to this question continues to evolve, it is becoming increasingly clear that the risks of detection have only grown – and will continue to do so. The latest news on this front comes from Business Week, which reported Sunday that the IRS has requested account holder information from Liechtenstein’s second largest bank, LLB. Specifically, the IRS has asked for information pertaining to accounts holding $500,000 or more anytime since 2004. Current and former LLB account holders who continue to hold undisclosed offshore assets now have a rapidly closing window of opportunity to come into compliance before the IRS contacts them for an investigation. By coming forward voluntarily, an account holder reduces the chance of criminal prosecution and probably qualifies for the miscellaneous 27.5% penalty in lieu of potentially significantly higher tax and FBAR penalties.
LLB’s clients are likely not the only Liechtenstein account holders at significant risk of detection. Although the IRS’ previous investigation primarily targeted banks, there is anecdotal evidence that the IRS has also begun to pressure Liechtenstein advisors (e.g., lawyers, accountants, trust companies, and the like) to disclose their clients’ identities. Moreover, if Switzerland is any guide, the IRS will likely expand its Liechtenstein investigation to other banks after establishing a successful precedent with LLB’s likely forthcoming disclosure.
Given the ever-expanding scope of the IRS’ investigation (not to mention FACTA’s new financial-institution withholding and individual-reporting requirements), any person who previously chose not to disclose his or her offshore accounts should consider reexamining whether risking detection remains prudent. As of now, OVDI and other methods of coming into compliance — including quiet disclosures and prospective compliance — may still be reasonable choices. However, all of these options fall off the table if the IRS contacts a taxpayer before disclosure. Taxpayers in this position should strongly consider contacting an experienced tax advisor to discuss their options.
FBAR Penalties: The IRS Lays Down The Law On Quiet Disclosures
May 23, 2011As part of its current Offshore Voluntary Disclosure Initiative (“OVDI”), the IRS is strongly encouraging taxpayers against making so-called “quiet” disclosures, in which taxpayers file amended tax returns, pay the applicable taxes and interest, and hope that the IRS doesn’t identify them for further investigation. These disclosures are described as quiet because they involve neither alerting the IRS to the amended returns nor offering to pay any applicable penalties. Because taxpayers may rightfully perceive the 25-percent penalty required to participate in OVDI as a rather expensive pound of flesh, taxpayers holding undisclosed offshore accounts may conclude that making quiet disclosures, rather than entering OVDI, is a more palatable method to come into tax compliance. (more…)
