In our era of increasing globalization, there are ever more exacting and evolving compliance regulations from banks and other financial institutions to monitor and punish tax evasion and money laundering. The IRS has fine tuned its strategies to track and prosecute persons who are US citizens for tax purposes yet who fail to satisfy their tax obligations. In this regard, disclosure requirements are a large part of one’s responsibilities to the IRS in addition to paying taxes. As we have learned from the "Panama Papers" scandal, one can no longer easily hideaway assets in secret tax havens as US Citizens. US citizens are taxed on their worldwide income and are responsible for reporting the same. To remedy any gap in disclosure and payment requirements, IRS has created voluntary disclosure programs with different rules and penalties based on whether one's failure to file US taxes has been willful or non-willful. The IRS also allows for offers in compromise for US Citizens who live in the US and have outstanding tax liabilities and who wish to clear up this liability for a lower amount than what was previously due. I am trained at quickly identifying the important facts and circumstances behind each client's situation to present a complete and favorable picture of each client's tax story to the IRS and have deep knowledge of the myriad of forms that are particular to IRS practice.
IRS ONSHORE AND OFFSHORE VOLUNTARY DISCLOSURE PROGRAMS
What is the IRS Offshore Voluntary Disclosure Program?
The IRS Offshore Voluntary Disclosure Program is designed for taxpayers with exposure to potential liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all taxes due in respect of those assets.
Why should I make a voluntary disclosure?
Taxpayers should make a voluntary disclosure in order to become compliant with their tax obligations, avoid substantial civil penalties and to eliminate the risk of criminal prosecution for all issues relating to tax non-compliance and failing to file FBARs.
What are FBARs?
FBARs are Reports of Foreign Bank and Financial Accounts. If you have a financial interest in or signature authority over a foreign financial account, you might be required to report such account yearly to the Department of Treasury. It is a separate filing obligation that is not part of filing a tax return.
How does the IRS determine whether an applicant is eligible for the Offshore Voluntary Disclosure Program or the Streamlined Disclosure Programs?
Simply put, eligibility turns on whether one has willfully avoided one's tax liabilities or whether one was non-willful in doing so. Only non-willful applicants are eligible for the streamlined programs. This determination will be made by an IRS tax agent.
What is the difference between the Streamlined Foreign Disclosure Program and Streamlined Domestic Disclosure Program?
The Streamlined Foreign Offshore Procedures (SFOP) are created for US taxpayers residing outside the US while the Streamlined Domestic Offshore Procedures (SDOP) are created for US taxpayers residing within the United States. For SFOP applicants, original and amended returns may be filed with the application but for SDOP applicants original returns may not be filed. Also, the SFOP does not assess a 5% miscellaneous offshore penalty to the applicant while the SDOP does.
What are some factors that the IRS might consider in determining whether my failure to pay taxes was willful or non-willful?
Determinations by the IRS are based upon the facts and circumstances of each case. Generally, not fulfilling your tax obligation when you knew about it is considered to be a willful violation. Not fulfilling your tax obligations when you did not know of such obligation is generally considered to be non-willful. Also, quality and not quantity of the facts matters, which means that even if many factors speak to non-willful behavior, one factor that speaks to willful behavior might characterize one's overall behavior to be willful.
Why does it matter whether my failure to timely fulfill my US tax obligations is willful or non willful in nature?
If your failure to file is deemed willful, the IRS will not allow you to enter one of the streamlined programs. The streamlined programs impose fewer penalties and requires review of fewer tax returns and financial statements.
How many years of tax returns are reviewed for the OVDP program and Streamlined programs, respectively?
Eight years of amended tax returns are required for the OVDP application and three years of amended tax returns are required for the Streamlined applications.
OFFERS IN COMPROMISE
What is an offer in compromise?
The IRS defines an offer in compromise as an agreement between the taxpayer and the IRS to settle a tax debt for less than the full amount owed.
What are the eligibility criteria to submit an offer in compromise?
Before your offer can be considered, you must a) file all tax returns that you are legally required to file; b) have at least one bill for tax debt owed included on your offer; c) make all required estimated tax payments for the current year; and d) make all required federal tax deposits for the current quarter if you are a business owner with employees. Further, if you or your business is currently in an open bankruptcy proceeding you are ineligible to apply for an offer in compromise.
How does an offer in compromise differ from an installment agreement?
An offer in compromise is presented to the IRS when it is not possible to pay your tax liability in full or through an installment agreement. An installment agreement is one where one eventually pays the full tax bill along with penalty and interest.
What are trust fund taxes?
Trust fund taxes are monies that are withheld from employees’ wages such as income tax, Social Security and Medicare taxes. Responsible individuals such as employers may be held personally liable for the trust fund portion of the tax.
How much am I required to pay along with my offer?
You must pay an application fee along with a payment that is determined by the payment offer you choose. If you choose a lump sum cash payment schedule, then you would need to pay twenty percent (20%) of the total offer amount with the offer and the remaining balance paid in five or fewer payments within five or fewer months of the date that the IRS accepts your offer. If you choose a periodic payment schedule, then you would need to make the first payment with the offer and the remaining balance paid in monthly payments within six to twenty-four months.
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