Offshore Voluntary Disclosure Program

2020 Streamlined Domestic Offshore Procedures: Pros and Cons

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Noncompliant US taxpayers with undisclosed foreign assets and foreign income should consider their voluntary disclosure options in this new year 2020. Similarly to 2019, I expect that this year Streamlined Domestic Offshore Procedures will continue to be the flagship voluntary disclosure option for such taxpayers who reside in the United States. In order for the readers to better understand why I make this assertion, I would like to discuss the advantages and disadvantages of participating in the 2020 Streamlined Domestic Offshore Procedures.

2020 Streamlined Domestic Offshore Procedures: Background Information and Purpose

The IRS created the Streamlined Domestic Offshore Procedures (sometimes 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.

The main purpose of the Streamlined Domestic Offshore Procedures is to encourage noncompliant US taxpayers to voluntarily resolve their prior non-willful noncompliance with US international tax compliance requirements. These requirements include all US international information returns such as FBAR, Form 8938, Form 5471, Form 8621, Form 3520, Form 926, et cetera.

2020 Streamlined Domestic Offshore Procedures: Main Advantages

In exchange for this voluntary disclosure of their prior tax noncompliance, 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. The Miscellaneous Offshore Penalty is usually far below the 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 Procedures. This is one of the most important SDOP benefits.

Another advantage of the Streamlined Domestic Offshore Procedures is the limited scope of this voluntary disclosure option. Taxpayers only need to file a small number of amended US tax returns (usually three) and FBARs (usually six) – in other words, the filings are limited to regular statute of limitations without any expansions (as opposed to 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 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.

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, I am not saying that this is an “easy standard”, just an easier one) than reasonable cause.

2020 Streamlined Domestic Offshore Procedures: Main Disadvantages

For the purpose of this article, I will discuss only two major disadvantages to the Streamlined Domestic Offshore Procedures. First, the eligibility requirements are strict. This voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years and who are able to certify under the penalty of perjury that their prior noncompliance was non-willful. This certification has to be made specifically with respect to unreported foreign income, FBARs and each other international information return.

Most cases have positive and negative facts at the same time. Hence, a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. This means that it is not easy to make a decision on whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures. This decision should be done only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.

The second major disadvantage of the Streamlined Domestic Offshore Procedures is lack of a definitive closure; there may be a follow-up audit after the IRS processes your voluntary disclosure package. Unlike OVDP, Streamlined Domestic Offshore Procedures does not offer a Closing Agreement without an audit. 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 2020 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!

2020 Offshore Voluntary Disclosure Options | US International Tax Lawyers

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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!

Post-OVDP Audits | Offshore Voluntary Disclosure Lawyer & Attorney

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A significant number of US taxpayers who went through the OVDP mistakenly believed that they were immune from the IRS post-OVDP audits concerning their post-voluntary disclosure compliance. Sherayzen Law Office has repeatedly warned in the past that these taxpayers were mistaken with respect to their exposure to potential post-OVDP audits. The recent announcement of a new IRS compliance campaign concerning post-OVDP tax compliance confirmed the correctness of Sherayzen Law Office’s analysis.

Post-OVDP Audits: OVDP Background Information

The IRS created the Offshore Voluntary Disclosure Program (“OVDP”) as an incentive for US taxpayers to come forward and disclose their prior willful and non-willful noncompliance with US tax reporting requirements concerning foreign assets and foreign income. In exchange for the voluntary disclosure, the taxpayers paid a significantly lower penalty than what they otherwise could have had to pay outside of the OVDP. Moreover, taxpayers also received protection from IRS criminal prosecution of their prior tax noncompliance.

OVDP is not just one program, but a series of programs. The initial one was created in the early 2000s, but it was a relatively small and unknown program. The first program that became influential was the 2009 OVDP. The 2009 OVDP was created on the heels of the IRS victory in the UBS case and it closed on October 15, 2009.

Then, after the passage of the Foreign Account Tax Compliance Act (“FATCA”) in 2010, the IRS created the 2011 Offshore Voluntary Disclosure Initiative (“2011 OVDI”). The 2011 OVDI was a hugely popular program. Its success led to the creation of 2012 OVDP and, finally, 2014 OVDP.

The implementation of FATCA had materially altered the IRS interest in the OVDP while the number of the OVDP participants precipitously dropped due to the success of the Streamlined Compliance Initiatives (i.e. Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures). The 2014 OVDP program was closed on September 28, 2018.

Post-OVDP Audits: False Sense of Security After OVDP

Some of the OVDP participants have mistakenly treated their OVDP disclosure as a remedy capable of curing not only their past tax noncompliance, but also future compliance issues. In other words, after going through the OVDP, these taxpayers relaxed their commitment to their ongoing annual compliance. Some of them started filing their FBARs irregularly or stopped filing them altogether while others under-reported their foreign income. Still others engaged in a different conduct overseas without realizing that their new way of doing business gave rise to a different set of US reporting requirements.

Many of these taxpayers also erroneously believed that, by going through the OVDP, they were taken off the “IRS radar”. This means that they felt that the IRS was highly unlikely to audit them after their voluntary disclosure.

Post-OVDP Audits: IRS Noticed Noncompliance Among OVDP Participants

In reality, as Sherayzen Law Office had suspected, the IRS engaged in extensive analysis of the OVDP participants’ behavior after their voluntary disclosure. Of course, it was not difficult for the IRS to monitor them, because the IRS already had a full list of the OVDP participants at its disposal. Some of the data came from field audits while other information was derived from FATCA and data analysis.

As a result of its analysis, the IRS discovered the aforementioned disturbing noncompliance trends among former OVDP participants.

Post-OVDP Audits: July of 2019 IRS Compliance Campaign

After it uncovered these noncompliance trends among the former OVDP participants, the IRS announced in July of 2019 a campaign to specifically target taxpayers who went through the OVDP. As part of this campaign, the IRS will send out soft letters and conduct post-OVDP audits.

Post-OVDP Audits: Potentially Disastrous Consequences for Noncompliant Taxpayers

The targets of this IRS compliance campaign will be in a particularly difficult legal situation for two main reasons. First, during a post-OVDP audit, the taxpayers are unlikely to be able to claim non-willfulness with respect to their post-OVDP tax noncompliance because of the knowledge of US tax requirements that they acquired during their voluntary disclosures. In fact, it is difficult to see how non-willfulness can be established in any way other than claims based on new and/or extraordinary circumstances.

Second, since it is not likely that they will be able to establish non-willfulness, taxpayers will most likely face willful penalties during an IRS audit, perhaps even civil and criminal fraud penalties. The IRS is unlikely to be lenient with taxpayers who already benefitted from a voluntary disclosure and persisted in their noncompliance afterwards. In other words, a post-OVDP audit may result in disastrous consequences for noncompliant taxpayers.

Contact Sherayzen Law Office for Professional Help With Post-OVDP Audits

Given the particularly dangerous nature of a post-OVDP audit, a taxpayer subject to this type of an IRS audit must retain an experienced international tax attorney as soon as he is notified about the commencement of the audit. Failure to do so may severely damage the taxpayer’s ability to defend against subsequent IRS penalties.

This is why you need to contact Sherayzen Law Office as soon as possible. We are a highly-experienced international tax law firm that has helped hundreds of US taxpayers to resolve their past noncompliance with US tax laws, including in the context of an IRS audit. We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

The Booker Case: ex-CPA Indicted for FBAR violations | FBAR Lawyer News

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On August 27, 2019, the US Department of Justice (“DOJ”) announced that a federal grand jury returned a superseding indictment charging Mr. Brian Booker, a former resident of Fort Lauderdale, Florida, whose business specialized in international trade, with failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) and filing false documents with the Internal Revenue Service (IRS). Let’s discuss the Booker case in more detail.

Facts of the Booker Case According to Indictment

Mr. Booker was a Certified Public Accountant who owned a Panamanian cocoa trading company. He allegedly operated that company from Venezuela, Panama, and his former residence in Fort Lauderdale, Florida.

The superseding indictment alleges that, for calendar years 2011 through 2013, Mr. Booker failed to disclose his interest in financial accounts located in Switzerland, Singapore, and Panama on annual Reports of Foreign Bank and Financial Accounts (FBARs) as required by law. Booker also allegedly filed false individual income tax returns for tax years 2010 through 2012 that failed to report to the IRS all of his foreign bank accounts.

Moreover, the indictment alleges that Mr. Booker filed a false offshore voluntary disclosure under the Streamlined Domestic Offshore Procedures. The superseding indictment claims that Mr. Booker’s Streamlined submission falsely claimed that his failure to report all income, pay all tax and submit all required information returns, such as FBARs, was due to non-willful conduct.

The Booker Case: Potential Criminal Penalties

If convicted, Mr. Booker faces a maximum sentence of five years in prison for each count related to his failure to file an FBAR. He also faces a maximum sentence of three years in prison for each of the counts related to filing false tax documents.

The Booker Case: Mr. Booker is Presumed Innocent Until Proven Guilty

The readers should remember than an indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.

The Booker Case: Potential Lesson for Streamlined Filers

The Booker case contains two valuable lessons for other US taxpayers who utilize the Streamlined Compliance Options, such as Streamlined Domestic Offshore Procedures (“SDOP”) and Streamlined Foreign Offshore Procedures (“SFOP”).

First, SDOP and SFOP are reserved for non-willful taxpayers only. If you were willful in your noncompliance, utilizing these options can result in a criminal investigation. It is not known if the IRS commenced the investigation of Mr. Booker due to his SDOP filing, but it is very possible that this was the case.

Second, the IRS does not simply “rubber-stamp” all SDOP and SFOP submissions. Taxpayers should expect a rigorous review of their cases.

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

If you are a taxpayer who has not filed his required FBARs, contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers to utilize various offshore voluntary disclosure options, including SDOP and SFOP, to bring themselves into full compliance with US tax laws, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

FY 2018 DOJ Criminal Case Statistics | Tax Lawyer & Attorney Minneapolis

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An analysis of the fiscal year 2018 DOJ criminal case statistics reveals certain interesting patterns about federal criminal tax prosecution in that year. Let’s explore in more detail these patterns.

2018 DOJ Criminal Case Statistics: Typical Tax Criminal

The analysis of the FY 2018 DOJ criminal case statistics reveals an interesting fact – a typical tax criminal is very different from any other type of a criminal. A typical tax criminal is about 50 years old and has at least one college degree; and, he is male.

This finding is not very surprising, because this category of males happens to also include the description of one of the most productive and affluent parts of our society. Rational risk-taking and even gambling are also characteristics that belong to this demographic.

2018 DOJ Criminal Case Statistics: Fewer but Longer Sentences

In FY 2018, 577 tax crime offenders were sentenced compared to 660 in 2017. The tax crime sentence, however, was much longer than in 2017 – 17 months in FY 2018 versus 13 months in FY 2017.

It should be pointed out that the majority of tax crime offenders entered into plea agreements. Only 7.5% of tax crime cases went to trial.

2018 DOJ Criminal Case Statistics: Judges Are Mostly More Lenient Than Federal Sentencing Guidelines

Another interesting fact is revealed by the FY 2018 DOJ criminal case statistics concerning sentencing. In FY 2018, federal judges were more lenient than the federal sentencing guidelines, thus considering them too harsh for the crimes committed. Almost 76% of sentences fell short of the minimum recommended by the federal sentencing guidelines. About 24% of tax crime sentences fell within the federal sentencing guidelines, but even 65.1% of them were at the minimum end of the recommended range.

Tax practitioners, however, should not ignore the guidelines or assume that the judges will always be lenient: 10 sentences or 7.8% of the 129 cases within the guidelines came in at the maximum end of the range. There were also additional sentences that even exceeded the guidelines.

2018 DOJ Criminal Case Statistics: Probation

In addition to prison time, the courts imposed probation and other conditional confinement which affected the average 17-month sentence that was discussed above. Without the probation, the average FY 2018 tax crime sentence was 23 months. About 32.2% of the tax crime convictions received probation or probation plus some other conditions of confinement (other than prison).

2018 DOJ Criminal Case Statistics: Fines and Restitution

72.1% of tax crime cases resulted in sentences which included restitution but no fines; 16.3% included both; 6.1% of sentences contained neither fines nor restitution. In FY 2018, the judges imposed fines and restitution totaling close to $283.1 million; this averages at $27,517 in fines and $565,766 in restitution per case.

Sherayzen Law Office Strives to Help Its Clients to Avoid Criminal Prosecution

US international tax law is replete with criminal penalties. A US taxpayer who fails to comply with US international tax requirements must always contend with the possibility of facing criminal prosecution.

One of the primary goals of Sherayzen Law Office is to help its clients reduce and even eliminate the possibility of a criminal prosecution with respect to prior noncompliance with US tax laws. A number of strategies may be employed to achieve this goal depending on the situation, including offshore voluntary disclosure and proper handling of an IRS audit.

Contact Sherayzen Law Office for professional help with reducing the possibility of criminal prosecution with respect to your past US tax noncompliance.