There are several methods available for a taxpayer with foreign assets to disclose this information to the Internal Revenue Service (IRS) with the aid of a skilled offshore disclosure attorney. Failure to do this could lead to legal troubles, so it is important to join an offshore disclosure program in Washington DC to prevent an IRS investigation.
A person just has to file their amended tax returns, such as the previously-unfiled FBARs or a previously-unfiled Form 8938, in order to join a disclosure program. Depending upon the type of program, there might be additional forms that may accompany those documents, but generally speaking, a person just mails in a disclosure. FBARs have to be electronically filed, and for some disclosures, a person needs to get pre-cleared.
For most of the other programs, it is a one-and-done filing. They must then wait for the IRS to process all of the forms and payments, and confirming that the taxpayer has come into compliance with their previously noncompliant foreign accounts and unreported foreign income. Thus, joining an offshore disclosure program requires patience and diligence from a Washington DC taxpayer.
There are several factors that determine which kind of disclosure program will work best for someone’s specific situation, which is why hiring an attorney is a good move. The enforcement priorities of the IRS shift from time to time, but international accounts and unreported foreign income have been a high priority of the IRS and Department of Justice for years.
Tax lawyers will look at whether the taxpayer showed any willfulness and intent to not file the forms, to not pay the taxes, or if they otherwise engaged in willful blindness. A non-willful client may be someone who inherited Swiss bank accounts from their grandfather and might not have understood that the U.S. requires reporting of worldwide income.
The United States is one of the only countries that requires worldwide income reporting. This requirement applies to U.S. citizens, green card holders, and those who satisfy the substantial presence test.
A lawyer will want to review the size of the foreign account, as a lot of the potential penalties are going to be based upon the size of the foreign accounts and the amount of the unreported income. This will inform the best approach that puts the least amount of risk on the taxpayer for additional penalties as they are brought into compliance. It is important to do this quickly because some of the disclosure programs that the IRS offers could potentially end without much warning, leaving someone stuck with a penalty.
A taxpayer in Washington DC cannot join an offshore disclosure program if an IRS investigation has begun. The backbone of the United States Federal Tax Administration is the principle of voluntary compliance, which means the taxpayer has several duties and responsibilities. They must timely file and self-assess their tax balance dues, then pay that tax, and also keep records if the IRS wants to inspect them in an audit.
These disclosures attempt to help people come into compliance voluntarily and it would go against that policy if someone waited until they were caught to try to join a program. One of the first things a lawyer will do is try to get transcripts, compliance checks, and other data from the IRS to see whether they have begun a civil or criminal investigation against a taxpayer. If that investigation has already begun, all of these potential disclosures are off the table.
Timing is an important aspect of disclosing foreign bank accounts and income, so you should not delay in calling for legal help. Joining an offshore disclosure program in Washington DC will help prevent a conflict with the IRS.