The Risky Streamlined Filing Procedure for Foreign Accounts

Published On:

Last Updated On:

When you as a Michigan resident have combined balances of foreign accounts exceed $10,000, you will need to file a disclosure statement with tax authorities. Failure to do so could result in tax evasion charges, and this can bring with it criminal penalties.

However, in 2009 the IRS began offering opportunities to disclose this unreported foreign account information with the promise of reduced penalties. The IRS then offered the offshore voluntary disclosure program (OVDP).

While this apparently increased the number of taxpayers with offshore accounts filing the proper forms, the OVDP was not always a popular remedy.

Penalties under the OVDP remained severe.

Thus in 2012, tax authorities put into place a streamlined filing procedure in instances where the failure to report foreign accounts was non-willful.

The advantage of this streamlined procedure was that penalties a taxpayer faced were significantly lower. There were tremendous disadvantages, however. Under the streamlined procedure, unlike the OVDP, there was no protection for taxpayers from criminal prosecution. Also, the streamlined process does not provide a “pre-clearance procedure.” Such a procedure would let the taxpayer know whether the disclosure of the foreign accounts was timely.

Most importantly, the IRS may not necessarily view the failure to report foreign accounts under the streamlined procedure as being non-willful. In fact, the government could very well view it otherwise putting the taxpayer in a tremendous bind. Also, especially in cases where foreign accounts are substantial, the IRS is going to scrutinize the information very closely in any case.

Understand the potential risks

It is important that you understand the potential risks in participating in these voluntary disclosure programs. The requirements to acquire relief could be extremely complex. A seasoned tax attorney can help explain the risks to you and help you take that course of action that will prevent the possibility of criminal prosecution from arising.

Share The Knowledge! 😊

Share on email
Email
Share on linkedin
LinkedIn
Share on twitter
Twitter
Share on facebook
Facebook

Ready to secure your financial future? Subscribe Today For Tax Knowledge Tomorrow

JOIN 2,000+ OTHERS. YES, IT’S COMPLETELY FREE. ZERO SPAM, UNSUBSCRIBE AT ANY TIME.

IRS tax attorneys

We're Here For You.

Let’s end your IRS tax problems. Fill out the form below and we’ll provide you with a free consultation.

How Can we help?

Don’t worry, our consultations are 100% Confidential & 100% Free