Top 10 Tips When Selecting an Offshore Voluntary Disclosure Option
For years, individuals who inadvertently failed to report offshore assets to the federal government were able to do so under the IRS’s Offshore Voluntary Disclosure Program (OVDP). However, the IRS closed the OVDP in 2018. In 2019 and beyond, the primary option available to federal taxpayers is the IRS’s Streamlined Disclosure Program for Offshore Accounts. Here are a Washington DC tax attorney’s top 10 tips for making a streamlined filing if you have failed to report qualifying foreign financial assets to the IRS:
1. Determine if You are Eligible to File
Not everyone who holds foreign financial assets is eligible for relief under the Streamlined Disclosure Program for Offshore Accounts. In order to be eligible, you must be an individual taxpayer (or the representative of an individual taxpayer’s estate), you must have a valid tax ID number, and you must not be the subject to an ongoing examination or investigation.
2. Determine Whether Your Failure to File Will Be Deemed “Non-Willful”
The IRS’s streamlined filing procedures are only available to individuals who have committed “non-willful” reporting failures. This means you must be able to demonstrate that your failure was the result of either negligence, inadvertence, a mistake or a good-faith misunderstanding of the law.
3. Be Prepared to Pay What You Owe, Plus Penalties
When you submit a streamlined filing, you must pay what you owe to the IRS. You must also pay a penalty. However, the penalty you pay when you submit a streamlined filing is significantly less than the penalty you would pay as the result of an audit or investigation.
4. Know What Forms You Need to File
In order to submit a streamlined filing, you need to prepare and file several tax forms. This includes (but is not necessarily limited to) FinCEN Form 114, IRS Form 8938 and IRS Form 14654.
5. Get Out Your Red Pen
When you submit these forms with your amended return, you are required to write “Streamlined Domestic Offshore” in red at the top of each page of your amended return.
6. Address Any Issues that are Specific to the Type of Asset You are Reporting
There are additional filing requirements for certain types of offshore assets. For example, if you are filing in relation to a qualified retirement plan, you must submit a written request for an extension to elect for deferral, and potentially other documentation as well.
7. Be Prepared to Deal with the IRS
When you submit a streamlined filing, you need to be prepared to deal with the IRS. IRS agents will scrutinize your calculation of tax, interest and penalties, and they will look for even the most-minute technical deficiencies in your streamlined filing.
8. Be Prepared for the IRS to Challenge Your Assertion of Non-Willfulness
The IRS also heavily scrutinizes taxpayers’ certifications of non-willfulness. If the IRS determines that your failure to file was willful, then it can open an investigation and pursue full penalties for your filing deficiency.
9. Consider Your Other Options
While the Streamlined Disclosure Program for Offshore Accounts is your primary option for reporting offshore assets, it is not the only option available. Depending upon your individual circumstances, the RS Criminal Investigation Voluntary Disclosure Program may be an option, and you may have other options as well.
10. Get Help from an Experienced Washington DC Tax Attorney
In order to ensure that you submit an accurate filing and mitigate your risk of facing additional penalties, it is important that you work with an experienced Washington DC tax attorney to submit your voluntary offshore disclosure filing. To speak with an attorney in confidence, call Kevin E. Thorn, Managing Partner at Thorn Law Group at 202-349-4033 or speak to us online now.