Opting-Out of OVDI or OVDP: Escaping Your Accountant’s Mistakes

The rise in the voluntary disclosures of offshore assets caught the accounting profession by surprise. The great majority of the accountants were not trained in international tax matters and learned about the existence of FinCEN Form 114 formerly known as TD F 90-22.1 (commonly known as “FBAR”) from their clients.

However, in their ignorance of the matters involved, these accountants simply treated the FBAR disclosure as a regular accounting matter and herded their clients into the IRS voluntary disclosure programs (like 2009 OVDP, 2011 OVDI and 2012 OVDP) without much consideration of complex legal issues involved, without any attempt to analyze the individual facts of each case, and, often, without the understanding of the terms of these official voluntary disclosure matters.

Unfortunately, a lot of individuals ended up paying outrageous Offshore Penalties and unnecessary legal and accounting fees in these programs. Some of these individuals were not even told by their accountants of the consequences of entering into the 2011 OVDI or 2012 OVDP. Still more participants of these programs were not even told about the modified voluntary disclosure alternative (also known as “noisy disclosure” and “reasonable cause disclosure”).

For the individuals who are currently in the 2011 OVDI and 2012 OVDP programs and who have not signed the Closing Agreements, there is still a chance to see if they can escape the unnecessary penalties.

The escape route is known as the “opt-out” of the program. This route should only be taken after you consulted with an experienced international tax attorney who thoroughly analyzed your case; do NOT try to do it on your own, because there is no turning back – once you are out of the OVDI or OVDP, you cannot re-enter the program later.

Contact Sherayzen Law Office to Discuss Your Opt-Out of OVDI/OVDP Options

This article is intended for educational purposes only and does not constitute legal advice. Make sure that you discuss your opt-out options with an experienced international tax attorney before taking any action.

If you are currently in the OVDI or OVDP programs and you would like to understand the consequences of opting-out of the OVDI or OVDP, contact Sherayzen Law Office NOW.

Our experienced international tax firm will thoroughly analyze your case and describe to you the potential consequences of the opt-out of the OVDI or OVDP.

Call or email our experienced voluntary disclosure team!

 

 

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

FATCA, Form 8938 and TD F 90-22.1 Disclosure: Making Informed Decisions

The past decade brought on a wave of new international tax legislation as well as unprecedented enforcement of older tax laws. From FinCEN Form 114 (formerly Form TD F 90-22.1) (commonly known as “FBAR”) to new FATCA legislation that led to the creation of Form 8938, the current US tax regime with respect to international obligations of US persons has become so complex that it is almost impossible to navigate it for most taxpayers without the professional help of international tax lawyers.

Increasing Complexity of US Tax Laws Requires International Tax Attorney Involvement

With increased complexity of the international tax landscape, the chance of running afoul some US tax rule has become very, very high. Since international tax laws are usually associated with high non-compliance penalties, the taxpayers need to make an informed decision on how to deal with their prior tax non-compliance.

Nowhere is the urgency and necessity of making informed decisions is so high as when it comes to FBARs and Form 8938, primarily because of draconian penalties associated with failure to file these forms Form 114 (formerly TD F 90-22.1). The ability to analyze the fact pattern, spot all the issues and identify available options based on experience are crucial in this esoteric area of law and the international tax attorneys experienced in voluntary disclosures should be handling such cases.

Choosing the Right Attorney is a Challenge

Unfortunately, it is precisely in this area that there is a serious obstacle to getting the necessary information to make an informed decision. The obstacle is that there is a tremendously small number of international tax attorneys who practice in this area of law and these professionals are shielded by a mass of inexperienced and unqualified attorneys and especially accountants.

It is virtually impossible for taxpayers to state with certainty who is the right lawyer for their case. A lot of taxpayers immediately fall into the trap of going to their accountants to do voluntary disclosure. In a prior article, I already explained why this could be present a huge problem for the taxpayers.

Other taxpayers correctly realized that they need a tax attorney to get help with their voluntary disclosure. However, some of these taxpayers often make a mistake of hiring a tax lawyer who is not practicing international tax law.

Some taxpayers fall into the “local” trap where they choose an attorney because he or she is in their state or town, not because the attorney is an international tax attorney or experienced in the area of voluntary disclosures.

You Should Choose an International Tax Lawyer Experienced in Form 8938 (FATCA) and FBAR Voluntary Disclosure

In order to make an informed decision, the taxpayers who have undisclosed foreign assets should contact an international tax attorney who is experienced in the are of voluntary disclosures.

Sherayzen Law Office is an international tax law firm that is highly experienced in the area of voluntary disclosures involving FBARs and Forms 8938. Owner Eugene Sherayzen is an experienced international tax attorney who will thoroughly analyze your case, identify all relevant issues, provide accurate estimates of your FBAR and Form 8938 liability, and propose creative legal voluntary disclosure options.

Contact Sherayzen Law Office for help with FBARs and Form 8938.

FBAR Disclosure of Offshore Assets: the Importance of Issue Spotting

It is terrifying that so many accountants who take on the legal issue of FBAR disclosure are not trained in issue spotting. It may be the number one of the top reasons why so many voluntary disclosures handled by accountants and even attorneys have gone so wrong.

A lot of tax professionals who are familiar with voluntary disclosures concerning foreign accounts simply concentrate on the bigger issue of FBAR penalties. However, due to this over-simplification of the voluntary disclosure, they ignore the fact that most disclosures of offshore assets involve a lot of related issues that, besides their own importance, may directly influence the FBAR disclosure strategy.

For example, I have seen cases where accountants would begin a voluntary disclosure process with respect to foreign investment accounts that contains foreign mutual funds – the issue that immediately should be spotted by the accountants as potentially involving PFICs. Unfortunately, most accountants are not even aware of the existence of PFICs and their unique place in the Internal Revenue Code. Then, without recognizing this problematic issue, these accountants would herd their clients into the IRS Offshore Voluntary Disclosure Program (OVDP) claiming that there was full compliance with the accounts and claiming that these accounts should be excluded from the OVDP Offshore Penalty. The end-result in such cases would often be the rejection of the exclusion based on PFIC increase in tax (i.e. the PFIC distributions were reported but incorrectly calculated – i.e. income tax non-compliance).

Obviously, how the case would turn out would ultimately depend on its particular facts, but this is an example indicate of the trend and why it is so important to engage in issue-spotting.

Contact Sherayzen Law Office for Help with Your Voluntary Disclosure of Offshore Assets

If you have undisclosed foreign assets that should have been disclosed to the IRS on the FBAR, Form 8398 or other information returns, contact Sherayzen Law Office for help.

Our experienced international tax law firm will thoroughly review your case, identify the issues involved in your case, estimate your FBAR penalties, propose a definite action plan on how to deal with your situation and implement this plan.

Call or email our experienced voluntary disclosure team NOW!

Reducing Your FBAR Penalties

FBAR (FinCEN Form 114 formerly Form TD F 90-22.1) penalties can be absolutely draconian. However, with a help of an experienced international tax attorney, they do not have to be so brutal.

Unfortunately, the IRS, accountants and even many lawyers present an overly simplistic view of the FBAR penalty structure. They start out with the potential criminal penalties and absolutely outrageous willful penalties and they usually end there by arguing that a non-compliant taxpayer should enter into the OVDP program.

What many tax professionals do not discuss is the immense complexity of the FBAR penalty structure that offers various chances to reduce and, sometimes, even eliminate your FBAR penalties through establishing non-willfulness and various mitigation guidelines.

This is a discussion that a tax professional must have with his client; otherwise, the client will not get the full picture of his case and cannot make an informed decision with respect to his voluntary disclosure options.

Notice that the potential for reduction of the FBAR penalties that exists under the current law is not the same as chimerical schemes that abound the internet. On the contrary, this is a serious discussion of what your potential FBAR penalties may be and what is the likelihood of success.

In some case, mitigation of penalties is a real possibility while, in others, entering the OVDP program may constitute a better choice. The important argument at the core of this essay is that the taxpayer should know about all of the options before the decision to the OVDP is made – i.e. the taxpayer has a chance to make a fully-informed decision, not a fear-driven one.

Contact Sherayzen Law Office to Discuss the FBAR Penalty Structure and Possibilities for Reducing Your FBAR Penalties

If you have undisclosed foreign assets, contact Sherayzen Law Office for legal help with your voluntary disclosure. Our experienced tax law firm will thoroughly review your case, estimate your FBAR penalties, analyze the potential for reduction of these penalties vis-a-vis entrance into the OVDP and present to you the available voluntary disclosure options so that you can make an informed decision.

Official Treasury Currency Conversion Rates of December 31, 2012

Every year, the U.S. Department of Treasure publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”). Recently, the Treasury Department published the FMS rates for December 31, 2012. While there are other good reasons for the existence of these rates, the FMS rates for December 31 are especially important for persons who are required to file the FBARs.

The latest (January 2012) FBAR instructions require the use of Treasury’s Financial Management Service rates, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:

In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

For this reason, the international tax attorneys take their time to compile these rates with all updates. For your convenience, Sherayzen Law Office provides a table of the official Treasury currency conversion rates below (keep in mind, you still need to refer to the official website for any updates).

Country Currency Foreign Currency to $1.00
Afghanistan Afghani 51.8000
Albania Lek 105.6500
Algeria Dinar 77.8130
Angola Kwanza 95.0000
Antigua-Barbuda East Caribbean Dollar 2.7000
Argentina Peso 4.9100
Armenia Dram 406.0000
Australia Dollar 0.9640
Austria Euro 0.7590
Azerbaijan Manat 0.8000
Bahamas Dollar 1.0000
Bahrain Dinar 0.3770
Bangladesh Taka 81.0000
Barbados Dollar 2.0200
Belarus Ruble 8550.0000
Belgium Euro 0.7590
Belize Dollar 2.0000
Benin CFA Franc 496.0000
Bermuda Dollar 1.0000
Bolivia Boliviano 6.9600
Bosnia-Hercegovina Marka 1.4840
Botwana Pula 7.7700
Brazil Real 2.0470
Brunei Dollar 1.2220
Bulgaria Lev 1.4840
Burkina Faso CFA Franc 496.0000
Burma Kyat 852.0000
Burundi Franc 1535.0000
Cambodia (Khmer) Riel 4103.0000
Cameroon CFA Franc 496.0000
Canada Dollar 0.9950
Cape Verde Escudo 82.6850
Cayman Islands Dollar 0.8200
Central African Republic CFA Franc 496.0000
Chad CFA Franc 496.0000
Chile Peso 478.3500
China Renminbi 6.2300
Colombia Peso 1766.4000
Comoros Franc 361.3500
Congo CFA Franc 496.0000
Congo, Dem. Rep Congolese Franc 920.0000
Costa Rica Colon 509.7000
Cote D’Ivoire CFA Franc 496.0000
Croatia Kuna 5.6300
Cuba Peso 1.0000
Cyprus Euro 0.7590
Czech Republic Koruna 18.6300
Denmark Krone 5.6600
Djibouti Franc 177.0000
Dominican Republic Peso 40.1000
Ecuador Dolares 1.0000
Egypt Pound 6.3560
El Salvador Dolares 1.0000
Equatorial Guinea CFA Franc 496.0000
Eritrea Nakfa 15.0000
Estonia Euro 0.7590
Ethiopia Birr 18.1800
Euro Zone Euro 0.7590
Fiji Dollar 1.7590
Finland Euro 0.7590
France Euro 0.7590
Gabon CFA Franc 496.0000
Gambia Dalasi 34.0000
Georgia Lari 1.6600
Germany FRG Euro 0.7590
Ghana Cedi 1.9050
Greece Euro 0.7590
Grenada East Carribean Dollar 2.7000
Guatemala Quentzel 7.9020
Guinea Franc 6970.0000
Guinea Bissau CFA Franc 496.0000
Guyana Dollar 202.0000
Haiti Gourde 42.1500
Honduras Lempira 19.9100
Hong Kong Dollar 7.7500
Hungary Forint 221.9600
Iceland Krona 128.0100
India Rupee 54.4500
Indonesia Rupiah 9700.0000
Iran Rial 8229.0000
Iraq Dinar 1166.0000
Ireland Euro 0.7590
Israel Shekel 3.7320
Italy Euro 0.7590
Jamaica Dollar 92.0000
Japan Yen 86.1600
Jerusalem Shekel 3.7320
Jordan Dinar 0.7080
Kazakhstan Tenge 150.7000
Kenya Shilling 86.1000
Korea Won 1063.2400
Kuwait Dinar 0.2810
Kyrgyzstan Som 47.1000
Laos Kip 7966.0000
Latvia Lats 0.5290
Lebanon Pound 1500.0000
Lesotho South African Rand 8.4850
Liberia Dollar 49.0000
Libya Dinar 1.2840
Lithuania Litas 2.6180
Luxembourg Euro 0.7590
Macao Mop 8.0000
Macedonia FYROM Denar 45.4000
Madagascar Aria 2267.8200
Malawi Kwacha 344.0000
Malaysia Ringgit 3.0570
Mali CFA Franc 496.0000
Malta Euro 0.7590
Marshall Islands Dollar 1.0000
Martinique Euro 0.7590
Mauritania Ouguiya 300.0000
Mauritius Rupee 30.4500
Mexico New Peso 13.0400
Micronesia Dollar 1.0000
Moldova Leu 12.0630
Mongolia Tugrik 1394.3100
Montenegro Euro 0.7590
Morocco Dirham 8.4340
Mozambique Metical 29.6000
Namibia Dollar 8.4850
Nepal Rupee 87.3000
Netherlands Euro 0.7590
Netherlands Antilles Guilder 1.7800
New Zealand Dollar 1.2160
Nicaragua Cordoba 24.1000
Niger CFA Franc 496.0000
Nigeria Naira 156.1000
Norway Krone 5.5840
Oman Rial 0.3850
Pakistan Rupee 97.1800
Palau Dollar 1.0000
Panama Balboa 1.0000
Papua New Guinea Kina 1.9440
Paraguay Guarani 4245.0000
Peru Nuevo Sol 2.5500
Philippines Peso 41.0400
Poland Zloty 3.1040
Portugal Euro 0.7590
Qatar Riyal 3.6400
Romania Leu 3.3660
Russia Ruble 30.5230
Rwanda Franc 630.0300
Sao Tome & Principe Dobras 18469.0610
Saudi Arabia Riyal 3.7500
Senegal CFA Franc 496.0000
Serbia Dinar 86.1800
Seychelles Rupee 12.9580
Sierra Leone Leone 4317.0000
Singapore Dollar 1.2220
Slovak Euro 0.7590
Slovenia Euro 0.7590
Solomon Islands Dollar 7.3210
South Africa Rand 8.4850
Spain Euro 0.7590
Sri Lanka Rupee 127.5000
St Lucia East Carribean Dollar 2.7000
Sudan Pound 5.9000
Suriname Guilder 3.3500
Swaziland Lilangeni 8.4850
Sweden Krona 6.5120
Switzerland Franc 0.9160
Syria Pound 63.0000
Taiwan Dollar 29.0440
Tajikistan Somoni 4.7600
Tanzania Shilling 1580.0000
Thailand Baht 30.5800
Timor-Leste Dili 1.0000
Togo CFA Franc 496.0000
Tonga Pa’anga 1.6570
Trinidad & Tobago Dollar 6.3500
Tunisia Dinar 1.5500
Turkey Lira 1.7860
Turkmenistan Manat 2.8430
Uganda Shilling 2686.0000
Ukraine Hryvnia 8.0400
United Arab Emirates Dirham 3.6730
United Kingdom Pound Sterling 0.6180
Uruguay New Peso 19.0500
Uzbekistan Som 2014.0000
Vanuatu Vatu 90.1000
Venezuela New Bolivar 4.3000
Vietnam Dong 21000.0000
Western Samoa Tala 2.2050
Yemen Rial 214.5000
Zambia Kwacha 5185.0000
Zimbabwe Dollar 1.0000

1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM – former Yugoslav Republic of Macedonia.
4. Please, refer to the Treasury’s website for amendments regarding any reportable transactions in January, February, and March of 2013.