offshore voluntary disclosure lawyers Minneapolis

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!

FBAR Voluntary Disclosure | International Tax Lawyer & Attorney

I often receive calls from prospective clients who talk about FBAR voluntary disclosure. They usually have no clear idea of what is meant by this term and what its requirements are. In this article, I will discuss this concept of FBAR Voluntary Disclosure and explain how this concept covers a variety of offshore voluntary disclosure options.

FBAR Voluntary Disclosure: What is FBAR?

Before we discuss the meaning of FBAR Voluntary Disclosure, we need to understand what “FBAR” is. FBAR is an acronym for Report of Foreign Bank and Financial Accounts, officially known as FinCEN Form 114. US Persons must file FBAR to report their financial interest in or signatory authority or any other authority over foreign bank and financial accounts if the aggregate value of these accounts exceeds $10,000 at any point during a calendar year.

FBAR Voluntary Disclosure: Why FBAR Compliance Is So Important?

US taxpayers who fail to comply with their FBAR obligations may find themselves in an extremely difficult legal position, because FBAR has a highly complex and an exceptionally severe penalty system, which includes even criminal penalties for FBAR noncompliance. The form’s civil penalties include not only willful penalties, but also non-willful penalties – i.e. the IRS can assess FBAR penalties even if a taxpayer’s failure to file his FBARs was unintentional and accidental.

FBAR Voluntary Disclosure: What is Voluntary Disclosure?

“Voluntary disclosure” is a process by which taxpayers voluntarily self-correct their past noncompliance. When this process involves foreign assets, it is called “offshore voluntary disclosure”.

FBAR Voluntary Disclosure: Offshore Voluntary Disclosure Options (Tax Year 2020)

The IRS has created a number of voluntary disclosure programs to encourage taxpayers to come forward and correct their past US tax noncompliance. These offshore voluntary disclosure options include: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures (effectively discontinued several weeks ago), IRS Criminal Investigation Voluntary Disclosure Practice (used to be called “Traditional IRS Voluntary Disclosure”) and the now-closed OVDP (Offshore Voluntary Disclosure Process) and OVDI (Offshore Voluntary Disclosure Initiative).

Moreover, there is also a voluntary disclosure based on Reasonable Cause exception that is sometimes called “noisy disclosure”. This is not an official IRS voluntary disclosure program, but simply a voluntary disclosure venue based on specific provisions in the Internal Revenue Code.

Finally, some taxpayers attempt to do “quiet disclosures”. A quiet disclosure can mean a range of actions voluntarily taken by a taxpayer to comply with US international tax laws without officially informing the IRS about his past noncompliance with them. In other words, a taxpayer never takes advantage of any of the voluntary disclosure options and does not claim Reasonable Cause Exception defense; rather, he either files amended tax returns or simply starts to comply with US international tax laws without doing anything about his past noncompliance.

The IRS strongly disfavors quiet disclosures and does not consider them to be voluntary disclosures. In fact, the IRS has officially stated that the agency will try to identify the taxpayers who are doing it and audit them in order to impose penalties for past noncompliance.

FBAR Voluntary Disclosure Versus Offshore Voluntary Disclosure

You probably already noticed that I never listed “FBAR Voluntary Disclosure” as a voluntary disclosure option. The reason is because it is not an official voluntary disclosure option. Rather, FBAR Voluntary Disclosure is merely a term that refers to any offshore voluntary disclosure option involving past FBAR noncompliance (such as Streamlined Domestic Offshore Procedures).

Hence, when a prospective client calls me to discuss his FBAR voluntary disclosure, I know that he does not mean any specific offshore voluntary disclosure program but merely wishes to know what option he should use to voluntarily correct his past FBAR noncompliance.

Contact Sherayzen Law Office About Your FBAR Voluntary Disclosure

If you have not filed your required FBARs for prior years, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in offshore voluntary disclosures involving FBARs – this is our core specialty.

We have filed thousands of FBARs for hundreds of clients all over the world. We have prepared hundreds of voluntary disclosures under all offshore voluntary disclosure options, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Coronavirus Offshore Voluntary Disclosure: Problems & Opportunities

The advancement of coronavirus in the United States and around the world has significantly disrupted the normal conditions and assumptions for a US taxpayer who engages in an offshore voluntary disclosure of his unreported foreign income and foreign assets. I will refer to a voluntary disclosure conducted in this context of the coronavirus disruptions as Coronavirus Offshore Voluntary Disclosure. In this essay, I would like to discuss the most unique problems and opportunities that arise in the context of a Coronavirus Offshore Voluntary Disclosure.

Coronavirus Offshore Voluntary Disclosure: Most Important Problems

The spread of coronavirus created two important problems to conducting an offshore voluntary disclosure of foreign assets and foreign income.

The first and most significant problem is the ability of taxpayers to obtain the information necessary for the correct completion of US international information returns such as FBAR (FinCEN Form 114), Form 8938, Form 8865, Form 5471, et cetera. Oftentimes, in order to complete these returns, taxpayers have to retrieve information from many years ago.

This is a difficult task even without the coronavirus, because electronic access is often limited to just a few years. In cases that involve small and regional banks, the electronic access to information may simply not exist. Hence, a taxpayer often has to engage in a long process of mailing letters to banks requesting information; it is also a standard practice for taxpayers to personally travel to a foreign financial institution to obtain the necessary information.

The coronavirus prohibitions have made such travel virtually impossible due to cancellation of flights between countries. Even traveling within a country has been severely impacted. Moreover, there have been significant disruptions to ability of taxpayers to access financial institutions in the quarantined areas, such as northern Italy. Many financial institutions have simply closed their branches and ceased to operate in a normal way.

The combination of all of these factors has significantly curtailed taxpayers’ ability to collect the vital information necessary for the completion of an offshore voluntary disclosure.

The second most important problem caused by the coronavirus panic are communication disruptions. During a voluntary disclosure, taxpayers need to have access to their financial advisors and their international tax attorney. I’ve already explained above how the coronavirus bank closures have affected such communications.

The most significant communication issue between a taxpayer and his international tax attorney has been limited to mailing documents, particularly securing an original signature for Certifications of Non-Willfulness, Reasonable Cause Statements, amended tax returns and certain other IRS documents (such as Extension of Statute of Limitations in the context of an IRS audit). The coronavirus containment procedures have affected the flow of regular mail around the world and have caused significant delays in obtaining signed documents from clients.

It should mentioned that the normal communications between a client and his attorney were not significantly impacted. If there were any communication problems, this is most likely the result of the attorney’s failure to take advantage of modern means of communication.

Sherayzen Law Office’s usage of email, phone, Skype, Viber and certain other platforms for information exchange and other modern means of communication has assured continuous and uninterrupted communication between our firm and our clients. We have also encouraged and helped our clients to adopt certain procedures to mitigate other problems that have risen as a result of the coronavirus panic.

Coronavirus Offshore Voluntary Disclosure: Unique Opportunities

The coronavirus panic created not only unusual problems, but also unique opportunities for taxpayers with undisclosed foreign assets and foreign income. I will discuss here the two most important coronavirus opportunities.

First, the spread of this virus has given more time for noncompliant US taxpayers to bring their tax affairs into compliance with US tax laws. Not only has the IRS ability to pursue new international tax cases has been impacted by the virus, but the IRS moved the tax filing deadline to July 15, 2020. This means that taxpayers suddenly have three more months to work on their offshore voluntary disclosures without any interruption with respect to current tax compliance.

Second, more time means that taxpayers now can plan for and adopt more complex and beneficial strategies with respect to their offshore voluntary disclosures. For example, taxpayers who were planning to file extensions can now adopt a strategy to shift their voluntary disclosure period by timely filing their 2019 tax returns and 2019 FBARs.

Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure

If you have undisclosed foreign bank accounts and other foreign assets, contact Sherayzen Law Office for professional help. We have successfully helped hundreds of US taxpayers to bring their tax affairs into full compliance with US tax laws, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Coronavirus & Chinese Offshore Voluntary Disclosures | SDOP Tax Law Firm

The ongoing coronavirus pandemic has disrupted many areas of human activity around the planet. The coronavirus even affected the IRS offshore voluntary disclosures concerning US taxpayers’ unreported financial assets and income in China (“Chinese Offshore Voluntary Disclosures”). In fact, the impact of coronavirus on the Chinese Offshore Voluntary Disclosures has been severe and extremely disruptive. Let’s look at the top three ways in which coronavirus has disrupted the Chinese Offshore Voluntary Disclosures.

Coronavirus & Chinese Offshore Voluntary Disclosures: Access to Information

The first and most important disruption caused by coronavirus is reduced access to information necessary to complete offshore voluntary disclosures. As a result of the quarantine measures, many financial institutions in China are either closed or work only limited hours. Hence, it has become much harder to obtain relevant information from the Chinese financial institutions, particularly with respect to certain complex investment products and investment insurance policies.

Moreover, as a result of the suspension of travel between China and the United States, many taxpayers are unable to travel to China to obtain the necessary documents. In many cases, internet access to financial data in China is limited to only a few years, whereas taxpayers often need to go back at least six years to obtain the necessary information to accurately complete their delinquent FBARs. In most instances, a taxpayer needs to personally visit his financial institution to collect this older data. At this point, this is almost impossible.

Coronavirus & Chinese Offshore Voluntary Disclosures: Mailing of Signed Documents

With respect to US taxpayers who are currently in China, many of them have limited ability to execute the documents necessary to complete offshore voluntary disclosures and mail them to their international tax attorneys in the United States.

Coronavirus & Chinese Offshore Voluntary Disclosures: Case Schedule

As a result of the two factors above as well as the current communication disruptions in the United States, the coronavirus has caused long delays in the voluntary disclosures that involve undisclosed financial assets in China. The schedule disruptions can last from weeks to months; in fact, in some cases, it is too early to be able to fully assess the impact of coronavirus on an offshore voluntary disclosure schedule.

While Sherayzen Law Office has been able to minimize the impact of coronavirus on the Chinese Offshore Voluntary Disclosures, certain delays still exist due to clients’ inability to obtain the necessary information.

Contact Sherayzen Law Office for Help With Chinese Offshore Voluntary Disclosures

If you have undisclosed financial accounts or foreign businesses in China, contact Sherayzen Law Office for professional help as soon as possible. While the disruptions caused by coronavirus have been severe, by employing careful planning, we can still help you maximize your ability to complete your offshore voluntary disclosure in an accurate and timely manner.

We have already helped hundreds of US taxpayers like you, including in China, to successfully bring their financial and business affairs in full compliance with US tax laws. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!