Lead Article

2022 Streamlined Foreign Offshore Procedures | International Tax Lawyer

Streamlined Foreign Offshore Procedures has been the best voluntary disclosure option for eligible US taxpayers with undisclosed foreign assets and foreign income, and I predict that it will remain so in the year 2022. Let’s discuss in more detail the unique advantages of the 2022 Streamlined Foreign Offshore Procedures.

2022 Streamlined Foreign Offshore Procedures: Background Information and Purpose

The IRS created the current Streamlined Foreign Offshore Procedures (usually abbreviated as “SFOP”) on June 18, 2014, though the Certification forms became available only a few months later. Streamlined Foreign Offshore Procedures quickly became the most popular option for US taxpayers who reside overseas, because it is the only voluntary disclosure option that can truly be called an “amnesty program”.

Why did the IRS create Streamlined Foreign Offshore Procedures and offered such favorable terms? The problem is that the enforcement of international tax compliance for taxpayers who reside overseas is highly complex and very expensive. Where such noncompliance is willful, the penalty framework and deterrence considerations make it worthwhile for the IRS to engage in these expenses (although, even in these cases, the IRS offered a special voluntary disclosure option). With respect to non-willful taxpayers, however, this logic does not work well.

Hence, the IRS (correctly, in my opinion) decided that it would be in the best interests of the United States to allow noncompliant US taxpayers overseas voluntarily came forward and resolve their prior tax noncompliance. In order to achieve this goal, the IRS decided to offer such a sweet deal to these taxpayers that it would make no sense for these taxpayers to remain noncompliant. Streamlined Foreign Offshore Procedures is precisely this “sweet deal” meant to encourage non-willful US taxpayers who reside overseas to voluntarily resolve their prior noncompliance with US international tax reporting requirements.

2022 Streamlined Foreign Offshore Procedures: the “Sweet Deal”

Streamlined Foreign Offshore Procedures offers four great advantages to eligible participants. First and most important, it is a true tax amnesty program, because there are no penalties for prior noncompliance. There are no income tax penalties; the taxpayers only need to pay the extra tax owed plus interest. There is also no Offshore Penalty for prior noncompliance with respect to FBAR and other US information tax returns. It is definitely the best deal a taxpayer can ever get when it comes to offshore voluntary disclosure programs.

Second, Streamlined Foreign Offshore Procedures offers a simplified (not simple, though) offshore voluntary disclosure procedure which covers a relatively short disclosure period. Unlike the OVDP (Offshore Voluntary Disclosure Program), SFOP only demands the taxpayers to file tax forms within the general statute of limitations for tax returns (i.e. past three years) and a regular statute of limitations for FBARs (i.e. past six years).

Third, Streamlined Foreign Offshore Procedures allows its participants to resolve their prior non-willful noncompliance with respect to unreported foreign income as well as pretty much any US international information return (FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera).

Finally, the last major advantage of the Streamlined Foreign Offshore Procedures is that this option only requires to establish non-willfulness rather than a reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.

2022 Streamlined Foreign Offshore Procedures: Main Disadvantages

Usually, participation in the Streamlined Foreign Offshore Procedures is highly advantageous to noncompliant taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will briefly discuss three most important of them.

First of all, Streamlined Foreign Offshore Procedures is available only to taxpayers who satisfied the program’s foreign residency requirements. Even if you resided outside of the United States during most of each year and you are a bona fide tax resident of a foreign country, you still may not satisfy the strict residency requirements of SFOP.

Second, there is an issue of a shifting burden of proof. When they participate in the Streamlined Foreign Offshore Procedures, the taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SFOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.

The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Foreign Offshore Procedures.

Finally, participation in the Streamlined Foreign Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP, SFOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package This means that going through Streamlined Foreign Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.

Contact Sherayzen Law Office for Professional Help With 2022 Streamlined Foreign Offshore Procedures

If you have undisclosed foreign accounts or any other foreign assets, you should contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Foreign Offshore Procedures. We can also help you!

Contact Us Today to Schedule Your Confidential Consultation!

2022 Streamlined Domestic Offshore Procedures: Pros and Cons

As the year 2021 winds down, US taxpayers with undisclosed foreign assets and foreign income need to consider their 2022 offshore voluntary disclosure options. As it has been the case since the second half of 2014 (really the year 2018 when the 2014 OVDP was closed), I expect that Streamlined Domestic Offshore Procedures will continue to be the flagship voluntary disclosure option in 2022 for US taxpayers who reside in the United States. This is why noncompliant US taxpayers should understand well the main advantages and disadvantages of participating in the 2022 Streamlined Domestic Offshore Procedures.

2022 Streamlined Domestic Offshore Procedures: Background Information and Purpose

The IRS created the Streamlined Domestic Offshore Procedures (usually abbreviated as “SDOP”) on June 18, 2014, though the Certification forms became available only a few months later. Since its introduction, Streamlined Domestic Offshore Procedures quickly eclipsed the then-existing IRS Offshore Voluntary Disclosure Program (“OVDP”) and became the most popular offshore voluntary disclosure option for US taxpayers who reside in the United States. As we discuss the advantages of the 2022 SDOP, you will quickly understand the reason for this meteoric rise in popularity of the SDOP.

The main purpose of the Streamlined Domestic Offshore Procedures is to encourage non-willful US taxpayers to voluntarily resolve their prior noncompliance with US international tax reporting requirements in exchange for a reduced penalty, simplified disclosure procedure and a shorter disclosure period. Pretty much any non-willful US international tax noncompliance can be resolved through SDOP: foreign income, FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera.

2022 Streamlined Domestic Offshore Procedures: Main Advantages

In exchange for a voluntary disclosure of their prior tax noncompliance through SDOP, US taxpayers escape income tax penalties and pay only a one-time Miscellaneous Offshore Penalty with respect to their prior failures to file the required US international information returns. It is important to emphasize that the Miscellaneous Offshore Penalty replaces not only FBAR penalties, but also penalties for noncompliance with respect to other US international information returns, such as Forms 5471, 8865, 962, et cetera. Depending on the specific circumstances of a case, the Miscellaneous Offshore Penalty is usually below the combined potential penalties normally associated with failure to file these forms. In other words, noncompliant taxpayers can greatly reduce their IRS noncompliance penalties through their participation in the Streamlined Domestic Offshore Procedure. This is one of the most important SDOP benefits.

Another advantage of the Streamlined Domestic Offshore Procedures is the limited procedural scope of this voluntary disclosure option. What I mean by this is that the taxpayers should only submit the forms covered by the general statute of limitations unless they choose (i.e. not required, actually choose to do so) to do otherwise. The taxpayers only need to file three (sometime even less) amended US tax returns and six FBARs (sometimes seven and sometimes less than six). This limited disclosure stands in stark contrast with other major voluntary disclosure initiatives, such as 2014 OVDP (which required filings for the past eight years).

Moreover, despite the limited scope of the SDOP filings, taxpayers who utilize the Streamlined Domestic Offshore Procedures are usually able to fully resolve their prior US international tax noncompliance issues even if these years are not included in the actual SDOP filings. This means that the participating taxpayers are able “wipe the slate clean” – i.e. to erase their prior US international tax noncompliance from the time when it began. I should warn, however, that this is not necessarily always the case; I have already encountered efforts from the IRS to open years for which amended tax returns were not submitted (there were specific circumstances, however, in all of these cases that resulted in this increased IRS interference).

The last major advantage of the Streamlined Domestic Offshore Procedures is that this option only requires to establish non-willfulness rather than reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.

2022 Streamlined Domestic Offshore Procedures: Main Disadvantages

Usually, participation in the Streamlined Domestic Offshore Procedures is highly advantageous to noncompliance taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will concentrate only on the three most important of them.

First, this voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years. This requirement is the exact opposite of the Streamlined Foreign Offshore Procedures (“SFOP”) which allows for the late filing of original returns.

The problem is that there is a large segment of taxpayers who were perfectly non-willful in their prior US international tax noncompliance, but they never filed their US tax returns either due to special life circumstances (such as death in the family, illness, unemployment, et cetera), they were negligent or they believed that they were not required to file them (especially in situations where all of their income comes from foreign sources). These taxpayers would be barred from participating in the SDOP.

Second, when they participate in the Streamlined Domestic Offshore Procedures, the taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SDOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.

The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures. By the way, this decision should be made only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.

Finally, participation in the Streamlined Domestic Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP, SDOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package This means that going through Streamlined Domestic Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.

Contact Sherayzen Law Office for Professional Help With 2022 Streamlined Domestic Offshore Procedures

If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures. We can also help you!

Contact Us Today to Schedule Your Confidential Consultation!

2021 FBAR Civil Penalties | IRS FBAR Tax Lawyer & Attorney

As if they were not high enough, the US Congress has obligated the IRS to adjust FBAR civil penalties for inflation on an annual basis. In this article, I will provide a broad overview of the current FBAR penalty system and describe the current 2021 FBAR civil penalties.

2021 FBAR Civil Penalties: Overview of the FBAR Penalty System

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”), has always had a very complex, multi-layered system of penalties, which has grown even more complicated over the years. These penalties can be grouped into four categories: criminal, willful, non-willful and negligent.

Of course, the most dreaded penalties are FBAR criminal penalties. Not only is there a criminal fine of up to $500,000, but, in some case, a person can be sentenced to 10 years in prison for FBAR violation (and these two criminal penalties can be imposed simultaneously). Since the focus of this article is on FBAR civil penalties, I will not devote more time to the discussion of FBAR criminal penalties here.

The next category of penalties are FBAR civil penalties imposed for the willful failure to file an FBAR. These penalties are imposed per each violation – i.e. on each account per year, potentially going back six years (the FBAR statute of limitations is six years).

The third category of penalties are FBAR penalties imposed for a non-willful failure to file an FBAR or a filing of an incorrect FBAR. These penalties can be imposed on US persons who do not even know that FBAR exists.

Finally, with respect to business entities, a penalty can be imposed for a negligent failure to file an FBAR or a filing of an incorrect FBAR.

It is important to note that FBAR has its own reasonable cause exception that may be used to fight the assessment of any of the aforementioned civil penalties. Moreover, each of these penalty categories has numerous levels of penalty mitigation that a tax attorney may utilize to lower his client’s FBAR civil penalties.

2021 FBAR Civil Penalties: Penalties Prior to November 2 2015

Prior to November 2, 2015, FBAR penalties were not adjusted for inflation and stayed flat at the levels mandated by Congress. Let’s go over each category of penalties prior to inflation adjustment.

As of November 1, 2015, Willful FBAR penalties were up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation. Again, a violation meant a failure to correctly report an account in any year. Non-willful FBAR penalties were up to $10,000 per violation per year; it is far less clear what “violation” meant in this context. At that time, the IRS took a clear position that non-willful FBAR penalties are imposed on a per account basis similarly to willful penalties, but the validity of this position has been heavily compromised by recent court decisions. Finally, FBAR penalties for negligence were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.

2021 FBAR Civil Penalties: Inflation Adjustment

The situation changed dramatically in 2015. As a result of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Inflation Adjustment Act”), Congress mandated federal agents to: (1) adjust the amounts of civil monetary penalties with an initial “catch-up” adjustment; and (2) make subsequent annual adjustments for inflation. The inflation adjustment applied only to civil penalties.

The “catch-up” adjustment meant a huge increase in penalties, because federal agencies were required to update all of these penalties from the time of their enactment (or the last year the Congress adjusted the penalties) through November of 2015. This meant that, in 2015, the penalties jumped to account for all accumulated multi-year inflation. The catch-up adjustment was limited to two and a half times of the original penalty.

Fortunately, the Congress adjusted FBAR penalties in 2004 and the “catch-up” adjustment did not have to go back to the 1970s. It still meant a very large (about 25%) increase in FBAR civil penalties, but it was not as dramatic as some other federal penalties.

2021 FBAR Civil Penalties: Bifurcation of FBAR Penalty System

The biggest problem with the inflation adjustment, however, was the fact that it further complicated the already dense multi-layered FBAR system of civil penalties – FBAR penalties became dependent on the timing of a violation and IRS penalty assessment. In essence, the 2015 Inflation Adjustment Act split the FBAR penalty into two distinct parts.

The first part applies to FBAR violations that occurred on or before November 2, 2015. The old pre-2015 FBAR penalties described above applies to these violations irrespective of when the IRS actually assesses the penalties for these violations. The last FBAR violations definitely eligible for the old statutory penalties are those that were made concerning 2014 FBAR which was due on June 30, 2015. The statute of limitations for the 2014 FBAR ran out on June 30, 2021.

The second part applies to all FBAR violations that occurred after November 2, 2015. For all of these violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred. In other words, if an FBAR violation occurred on October 15, 2017 and the IRS assessed FBAR penalties June 17, 2021, the IRS would use the inflation-adjusted FBAR penalties as of the year 2021, not October 15, 2017.

2021 FBAR Civil Penalties: Penalties Assessed On or After January 28, 2021

Now that we understand the history of FBAR penalties, we can specifically discuss the 2021 FBAR civil penalties. The first thing to understand is that we are talking about penalties assessed by the IRS on or after January 28, 2021; prior to that date, the 2020 FBAR civil penalties were still effective.

The 2021 Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(C)(i)(I) is $136,399 per violation. So far, for willful FBAR penalties, “violation” is applied on a “per account for each year” basis described above. Last year (i.e. penalties assessed after February 19, 2020 and before January 28, 2021), the willful penalty was $134,806.

The 2021 Non-Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(B) is $13,640 per violation; last year, the non-willful penalty was $13,481. The term “violation” in the context of non-willful FBAR penalties at this point has not been settled. Starting last year and culminating with the recent 11th Circuit court decision, the courts have been applying the term “violation” on a per-form (rather than per-account) basis. It other words, a taxpayer can argue that a non-willful violation of $13,481 should be applied per each delinquent FBAR rather than each account reported on an FBAR. This is of course a highly beneficial approach (for taxpayers) to FBAR penalty imposition, but it is still a struggle to get the IRS to accept this position.

The 2021 Negligence FBAR penalty imposed under 31 U.S.C. §5321(a)(6)(A) is $1,166; if there is a pattern of negligence under 31 U.S.C. §5321(a)(6)(B), then the penalty goes up to $90,743. Last year, the respective amounts were $1,146 and $89,170.

Contact Sherayzen Law Office for Professional Help With Your Prior FBAR Noncompliance

Sherayzen Law Office is a leader in US international tax law and FBAR compliance. We have successfully helped hundreds of clients from over seventy countries resolve their prior FBAR noncompliance concerning disclosure of their foreign bank and financial accounts. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Indian Mutual Funds & US Person’s Tax Obligations | International Tax Attorney

After having handled so many offshore voluntary disclosures for my Indian and Indian-American clients, I can clearly see that US tax reporting obligations concerning Indian mutual funds is one of the most troublesome areas for my clients. In this article, I will focus on the three most important US tax reporting requirements that may be applicable to US taxpayers with Indian mutual funds – FBAR, FATCA Form 8938 and Form 8621.

Indian Mutual Funds: FBAR Reporting

The first and most important requirement that applies to US taxpayers with Indian mutual funds is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. As long they meet the filing threshold, US taxpayers are required to disclose all of their Indian mutual funds on FBAR.

FBAR is a very dangerous form. On the one hand, it is very easy to fall into noncompliance with this form due to its very low filing threshold – just $10,000. Moreover, this threshold is determined by taking the calendar-year highest balances of all of the taxpayer’s foreign accounts (even if these accounts are located in another country in addition to India) and adding them all up. Sometimes, this results in significant over-reporting of a person’s actual balances, which easily satisfies the FBAR reporting threshold.

On the other hand, FBAR has the most severe noncompliance penalties among all information returns concerning foreign asset disclosure. Its penalties range from non-willful penalties (i.e. potentially a situation where a person simply did not know about FBAR’s existence) to extremely high civil willful penalties and even criminal penalties. In other words, in certain circumstances, FBAR noncompliance may result in actual jail time.

Indian Mutual Funds: FATCA Form 8938

When it comes to the FATCA Form 8938 compliance, a taxpayer with Indian mutual funds will find it fairly easy as long as he correctly files his Forms 8621 (see below) and indicates on Form 8938 how many of these forms were filed with the tax return. This ease of reporting is meant to alleviate double-reporting of foreign mutual funds on a US tax return.

It is important to emphasize three points with respect to Form 8938 compliance for taxpayers with Indian mutual funds. First, even if you file Forms 8621, Form 8938 must still be attached to your tax return as long as you meet the relevant filing threshold (and the assets listed on Forms 8621 must be counted toward the threshold). Failure to file a Form 8938 may still draw a penalty in these circumstances and keep the statute of limitations open on your entire US tax return.

Second, Form 8938 and Form 8621 compliance does not in any way affect your obligation to file FBARs. This is the case even if this means that the same assets are reported three times.

Third, unlike FBAR, Form 8938 comes with a third-party FATCA verification mechanism. Under FATCA, the IRS should receive foreign-account information not only from taxpayers who file Forms 8938, but also from their foreign financial institutions. This means that it is much easier for the IRS to identify Form 8938 (and thereby Form 8621) noncompliance than that of FBAR. It also means that a Form 8938 noncompliance may have a higher chance to be investigated and penalized by the IRS.

Indian Mutual Funds: Form 8621 PFIC Reporting

We now come to the most critical difference in US tax compliance between foreign mutual funds and most other foreign assets. All foreign mutual funds, including the funds incorporated in India, are classified as PFICs or Passive Foreign Investment Companies under US international tax law.

While I will not explain here the complex PFIC calculations and the various PFIC elections that may be available to a US taxpayer with foreign mutual funds, I wish to discuss four most important points concerning PFIC compliance.

First, pursuant to the worldwide income reporting requirement, all US tax residents must calculate and disclose their PFIC income on their US tax returns. This is a significant compliance burden as PFIC calculations can be very complex and expensive. The professional fees for PFIC calculations may easily outstrip all other professional fees related to other aspects of your US tax compliance.

Second, since PFIC tax and PFIC interest are calculated independent of a taxpayer’s actual tax bracket, a taxpayer with Indian mutual funds may see a significant rise in his US tax liability. It may occur even in a situation where a taxpayer may not otherwise owe any tax to the IRS. This fact may be especially significant in a voluntary disclosure context.

Third, the actual disclosure of PFIC income occurs on Form 8621 before it is entered into your personal or business tax return. This information return must be filed with your US tax return. Unfortunately, since the vast majority of tax software programs (consumer and professional) do not support Form 8621 compliance, it is very likely that you will not be able to e-file your US tax return; rather, you may have to mail it.

Finally, Form 8621 is a very obscure requirement known mostly to a handful of US tax professionals who specialize in US international tax compliance (such as Sherayzen Law Office). This means that the majority of US taxpayers are not even aware of the fact that they need to comply with their Form 8621 reporting obligations. In other words, they believe themselves to be in compliance with US tax laws even though, in reality, they are not. Thus, the obscurity and complexity of Form 8621 pushes many US taxpayers into tax noncompliance.

Contact Sherayzen Law Office for Professional Help With US Tax Reporting of Your Indian Mutual Funds

If you are a US taxpayer with Indian mutual funds, contact Sherayzen Law Office for professional We have helped hundreds of US taxpayers with foreign mutual funds, including Indian mutual funds, to resolve their past FBAR, FATCA and PFIC noncompliance, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

2020 Offshore Voluntary Disclosure Options | US International Tax Lawyers

As the new year 2020 begins, it is important for US taxpayers with undisclosed foreign assets to consider their 2020 offshore voluntary disclosure options. Unlike last year, there have not been any drastic changes to the voluntary disclosure options since 2019. In this article, I would like to generally explore the 2020 offshore voluntary disclosure options available to US taxpayers who wish to reduce their IRS penalties by voluntarily resolving their prior US tax noncompliance concerning foreign assets and foreign income.

2020 Offshore Voluntary Disclosure Options: Streamlined Domestic Offshore Procedures

The Streamlined Domestic Offshore Procedures (“SDOP”) is currently the flagship voluntary disclosure option for US taxpayers who reside in the United States. SDOP is a highly beneficial voluntary disclosure option to non-willful taxpayers: it is simple, limited (in terms of the voluntary disclosure period for which tax returns and FBARs must be filed) and mild (in terms of its penalty structure). There are some drawbacks to SDOP, such as the imposition of the Miscellaneous Offshore Penalty on income-tax compliant foreign accounts, but the benefits offered by this option outweigh its deficiencies for most taxpayers.

The main challenge of SDOP is its requirement that a taxpayer certifies under the penalty of perjury that he was non-willful with respect to his prior income tax noncompliance, FBAR noncompliance and noncompliance with any other US international information tax return (such as Form 8938, 3520, 5471, et cetera). This is a huge problem for willful taxpayers and taxpayers who are in the “gray” area between willfulness and non-willfulness. It will be up to your international tax lawyer to make the determination on whether you are able to make this certification.

2020 Offshore Voluntary Disclosure Options: Streamlined Foreign Offshore Procedures

Streamlined Foreign Offshore Procedures (“SFOP”) is very similar to SDOP (in fact, both options were created in 2014), but it is even more beneficial to taxpayers who are able to satisfy SFOP’s eligibility requirements – this is a true amnesty program, because its participants do not pay IRS penalties of any kind, even on income tax due (taxpayers only need to pay the interest on additional tax due). Moreover, SFOP preserves SDOP’s non-invasive and limited scope of voluntary disclosure.

SFOP, however, is available to a much more limited number of US taxpayers who are able to satisfy its eligibility requirements, particularly those related to non-willfulness certification and physical presence outside of the United States. Again, you should contact Sherayzen Law Office to help you determine whether you meet the eligibility requirements of SFOP.

2020 Offshore Voluntary Disclosure Options: Delinquent FBAR Submission Procedures

Delinquent FBAR Submission Procedures (“DFSP”) is another voluntary disclosure option that fully eliminates IRS penalties. This is not a new option; in fact, in one form or another, it has always existed within the IRS procedures. Prior to 2014, it was even written into the OVDP (IRS Offshore Voluntary Disclosure Program) as FAQ#17.

While DFSP is highly beneficial to noncompliant US taxpayers, it is available to even fewer number of taxpayers than those who are eligible for SDOP and SFOP. This is the case due to two factors. First, DFSP has a very narrow scope – it applies only to FBARs. Second, DFSP has extremely strict eligibility requirements; even de minimis income tax noncompliance will deprive a taxpayer of the ability to use this option.

2020 Offshore Voluntary Disclosure Options: Delinquent International Information Return Submission Procedures

Delinquent International Information Return Submission Procedures (“DIIRSP”) has a very similar history to DFSP. In fact, it was “codified” into OVDP rules as FAQ#18. Similarly to DFSP, DIIRSP also offers the possibility of escaping IRS Penalties. DIIRSP has a broader scope than DFSP and applies to international information returns other than FBAR, such as Form 8938, 3520, 5471, 8865, 926, et cetera.

Since it turned into an independent voluntary disclosure option in 2014, DIIRSP’s eligibility requirements became much harsher. US taxpayers are now required to provide a reasonable cause explanation in order to escape IRS penalties under this option. On the other hand, the fact that there may be unreported income associated with international information returns is not an impediment by itself to participation in DIIRSP.

2020 Offshore Voluntary Disclosure Options: Modified IRS Traditional Voluntary Disclosure Program

The traditional IRS Offshore Voluntary Disclosure Program (“TVDP”) has existed for a very long time. However, it faded into a complete obscurity once the IRS opened its first major OVDP option in 2009. The closure of 2014 OVDP in September of 2018 has brought TVDP back to life, but in a modified format.

On November 20, 2018, the IRS has completely revamped the TVDP’s procedural structure and clarified the penalty imposition rules. I am almost tempted to call this new version of TVDP as “2018 TVDP”!

The main benefit of TVDP is that it is now the main voluntary disclosure option for taxpayers who willfully violated their US tax obligations. If you are willful taxpayer, contact Sherayzen Law Office to explore your voluntary disclosure option under the TVDP.

2020 Offshore Voluntary Disclosure Options: Reasonable Cause Disclosure

Since 2014, the popularity of Reasonable Cause disclosure (also known as “Noisy Disclosure”) has declined substantially due to the introduction of SDOP and SFOP. Nevertheless, Reasonable Cause disclosure continues to be a highly important voluntary disclosure alternative to official IRS voluntary disclosure options. In fact, the closure of the 2014 OVDP in September of 2018 has led to some resurgence of Reasonable Cause disclosures.

Reasonable Cause disclosure is based on the actual statutory language; it is not part of any official IRS program. Special care must be taken in using this option, because this is a high-risk, high-reward option. If a taxpayer is able to satisfy his high burden of proof, then, he will be able to avoid IRS penalties. If the IRS audits the Reasonable Cause disclosure and disagrees, this taxpayer may face significant IRS penalties and, potentially, years of IRS litigation.

Contact Sherayzen Law Office for Professional Analysis of Your 2020 Offshore Voluntary Disclosure Options

If you have undisclosed foreign assets, contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers from over 70 countries with their voluntary disclosures of foreign assets to the IRS, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!