The Downsides of Streamlined Disclosure

Posted in Offshore Account Update on August 31, 2017 | Share

If you have offshore accounts and you failed to comply with requirements to report those accounts, you should talk with a Washington DC tax attorney as soon as possible. The U.S. government has been aggressively cracking down on offshore investors, as well as on banks that cater to U.S. account holders. Many banks have turned over information on accountholders in exchange for avoiding prosecution for their parts in facilitating tax evasion, which means the IRS has information about a substantial number of offshore accounts – and you could be one of them.

If you are not yet under investigation by the IRS, you may have options to limit penalties for failing to disclose your offshore accounts. By participating in the Offshore Voluntary Disclosure Program, you can eliminate the threat of criminal prosecution and limit civil fines.  Non-willful violators could also opt for something called streamlined disclosure, which basically involves filing amended tax returns and delinquent Reports of Foreign Bank and Financial Accounts (FBARs). 

While streamlined filing is easier, faster, and less invasive than participating in the full OVDP program, there are big risks associated with choosing this option.  You need to talk with an experienced attorney about the potential pitfalls before you make the decision that a streamlined filing is the best choice.

Is Streamlined Disclosure Right for You?

Streamlined disclosure is open only to people who are non-willful violators. This means you have to attest, under penalty of perjury, that your failure to follow the rules for reporting your foreign accounts was caused by negligence or a lack of understanding of the law, rather than by a desire to willfully conceal accounts or a desire to intentionally evade income tax obligations.

Even if you claim your violation was non-willful, however, the government could view things differently and could decide that your violation actually was a willful one and thus streamlined compliance isn't an option for you.  A number of red flags could prompt the IRS to determine your violation was willful, including moving money among different foreign banks, holding the account in the name of offshore entities like trusts or foundations, or meeting with representatives of foreign banks while those representatives were on a visit to the United States.

Unfortunately, if the IRS determines you acted willfully after all, this would mean that you've now given the IRS a lot of information about you and about your accounts – and you aren't protected from criminal or civil prosecution.  Not only that, but if the government determines that you made false statements in your streamlined filing, this could lead to further criminal action.

You need to make certain that you understand the red flags that could result in the government determining your failure to report your offshore accounts was a willful one and you need to fully understand the risks associated with a streamlined filing. A Washington DC tax attorney like Kevin Thorn can provide the help you need in determining what your best course of action is regarding participation in an Offshore Voluntary Disclosure Program or a streamlined filing. 

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