Didn’t Voluntarily Disclose Your Offshore Account?
What To Do Now, After the End of Foreign Bank Secrecy.
by Asher Rubinstein, Esq.
The deadline for the IRS’ Voluntary Disclosure Program for foreign accounts expired on October 15, 2009. If you are the owner of a foreign account, and you did not come forward under the Voluntary Disclosure Program, what are your options?
Option One: come forward now. The IRS will still welcome your voluntary disclosure, even after October 15. In fact, the IRS has welcomed voluntary disclosures long before the most recent, widely publicized program for foreign accounts. The difference is that after October 15, the penalties are not as low. Still, criminal prosecution is usually avoided if you come forward before you are caught. Thus, if you did not enter the Voluntary Disclosure program, you may still come forward; you will pay penalties higher than those before October 15, but they will still be significantly lower than if you don’t come forward and the IRS catches you, in which case jail time for criminal tax fraud is also a frightening possibility.
But some people will not voluntarily come forward. They do not want to disclose their offshore accounts, and they do not want to give any portion of their foreign assets to the IRS. What can they do?
Option Two: convert your account to a tax-compliant structure. We have long counseled the use of tax-compliant strategies to minimize U.S. taxation of foreign accounts. We also advise clients on the legitimization of non-compliant offshore assets. We counsel clients regarding the proper steps to transform a non-compliant offshore account into one that complies with current U.S. laws. Although we cannot erase a non-compliant past, we can ensure full compliance going forward. Such steps may significantly reduce the risk of prosecution for previous violations.
Option Three: do nothing and hope that the IRS does not discover your account. You would be relying on past banking secrecy as a means of future protection. However, as the events of 2009 have proven, foreign banking secrecy no longer exists. We need only look to UBS’ disclosure of thousands of names of Americans with accounts they thought were protected under so-called Swiss banking secrecy, or the proliferation of Tax Information Exchange (TIE) Agreements between the US and numerous foreign “tax havens”. In light of this new world order, sooner or later the IRS will likely find your foreign account and then it will be too late. This “do nothing” strategy is not recommended.
Failing to remedy a non-compliant offshore account by voluntary disclosure (even now) or by converting to a tax-compliant structure, puts you at serious risk of harsh penalties in the event of discovery, including IRS criminal prosecution. As recent events have proven, discovery is very likely. Contact us before the IRS finds you.