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2019 Offshore Voluntary Disclosure Options | International Tax Lawyers

The closure of the IRS flagship 2014 Offshore Voluntary Disclosure Program (“OVDP”) in September of 2018 posed a critical issue of the 2019 offshore voluntary disclosure options available to US taxpayers. This is precisely the issue that I would like to explore today – the 2019 offshore voluntary disclosure options available to US taxpayers who wish to voluntarily resolve their prior US tax noncompliance concerning foreign assets and foreign income.

2019 Offshore Voluntary Disclosure Options: Streamlined Domestic Offshore Procedures

With the closure of the OVDP, the Streamlined Domestic Offshore Procedures (“SDOP”) became the main voluntary disclosure option for US taxpayers who reside in the United States. SDOP offers huge benefits to its participants in terms of simplicity of the process, limitations on the years subject to voluntary disclosure and the mildness of its penalty structure. There are some “unfair” provisions, such as subjecting income-compliant accounts to SDOP’s Miscellaneous Offshore Penalty, but, overall, the benefits offered by this option outweigh its deficiencies for most taxpayers.

The main obstacle to using SDOP in 2019 remains 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 an insurmountable problem for willful taxpayers. It will be up to your international tax lawyer to make the determination on whether you are able to make this certification.

2019 Offshore Voluntary Disclosure Options: Streamlined Foreign Offshore Procedures

Streamlined Foreign Offshore Procedures (“SFOP”) is SDOP’s brother; both options were announced at the same time in 2014 as two distinct parts of the Streamlined Filing Compliance Procedures. SFOP is available to US taxpayers who 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.

The taxpayers who are able to satisfy SFOP’s eligibility requirements will find themselves in a tax paradise, because SFOP is the closest option to a true amnesty program that the IRS ever provided to US taxpayers. Not only does SFOP preserve the non-invasive and limited scope of voluntary disclosure that characterizes SDOP, but SFOP also does not require US taxpayers to pay any penalties. A taxpayer only needs to pay the extra tax due with interest for the past three years. The announcement by the IRS of this option in 2014 was a true gift to US taxpayers.

2019 Offshore Voluntary Disclosure Options: Delinquent FBAR Submission Procedures

Another highly beneficial voluntary disclosure option for 2019 is Delinquent FBAR Submission Procedures (“DFSP”). 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 as FAQ#17.

Since its “independence” in 2014, DFSP is a somewhat more difficult option than what it used to be as FAQ#17. Nevertheless, it is still a zero-penalty option for those taxpayers who are able to satisfy its eligibility requirements. Unfortunately, the eligibility requirements are very strict and even de minimis income tax noncompliance will deprive a taxpayer of the ability to use this option.

2019 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. Since it became an independent option in 2014, however, its eligibility requirements became much harsher. Now, US taxpayers are required to provide a reasonable cause explanation in order to escape IRS penalties under this option.

2019 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 complete obscurity once the IRS opened its first major OVDP option. The recent closure of the OVDP has brought TVDP back to life.

In fact, the IRS is now presenting TVDP as the main, almost default, voluntary disclosure option for US taxpayers who willfully violated their US tax obligations. 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”!

2019 Offshore Voluntary Disclosure Options: Reasonable Cause Disclosure

This was the most popular voluntary disclosure option prior OVDP; then, after 2009 (and between various OVDP options), Reasonable Cause disclosure continued to play the role of the most important alternative to the OVDP. Since 2014, however, the appearance of SDOP and SFOP has substantially deflated the appeal of Reasonable Cause disclosures. The fact that the IRS closed the physical address for such disclosures and tried to make this option as unpopular as possible further contributed to the decline of Reasonable Cause disclosures. Starting the end of 2018, however, Reasonable Cause disclosure experienced some resurgence due to the closure of the OVDP, sometimes for all the wrong reasons.

Reasonable Cause disclosure (a/k/a “Noisy Disclosure”) is based on the actual statutory language; it is not part of any 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 2019 Offshore Voluntary Disclosure Options

If you have not been able to comply with your US international tax obligations concerning foreign assets and foreign income, you should contact Sherayzen Law Office for professional help.

Sherayzen Law Office is a leading international tax law firm in the area of offshore voluntary disclosures. Our highly specialized legal team, led by a known international tax attorney Mr. Eugene Sherayzen, has successfully helped hundreds of US taxpayers with assets in more than 70 countries to bring their tax affairs into full compliance with US tax laws.

We can Help You! Contact Us Today to Schedule Your Confidential Consultation!

Mizrahi-Tefahot Bank Rejects DOJ Settlement Offer | FATCA Tax Lawyer

On August 8, 2018, Mizrahi-Tefahot Bank (“Mizrahi-Tefahot”) informed the Tel Aviv Stock Exchange that its Board of Directors rejected a settlement offer from the US Department of Justice (“DOJ”).

It appears that the DOJ offer was received by the bank on August 7, 2018. The DOJ proposed that Mizrahi-Tefahot pay $342 million to settle the DOJ investigation into whether the bank helped US taxpayers evade US federal taxes.

Mizrahi-Tefahot felt that this was an unreasonably high amount to pay. In its financial statements for the quarter that ended on March 31, 2018, the bank reserved just $46.1 million to settle the DOJ investigation.

The official and primary reason for the rejection of the DOJ offer, however, was the fact that the DOJ’s letter was not accompanied by any details of how DOJ arrived at such a high sum of money. The letter did not contain even any references to any calculation principles. Mizrahi-Tefahot’s lawyer felt that any reasonable calculation of potential settlement amount would lead to a much lower settlement offer.

The most likely reason why Mizrahi-Tefahot felt so confident in rejecting the DOJ offer was its knowledge of the settlements paid by the Swiss banks. NPB Neue Privat AG, for example, only paid $5 million. Basler Kantonalbank believes it can settle for $100 million. In other words, it appears that the negotiation process with the DOJ has matured to the point where Mizrahi-Tefahot can reasonably predict the amount for which the DOJ would agree to settle the case.

Mizrahi-Tefahot is not the only bank in Israel under the IRS investigation. Bank Leumi settled its DOJ investigation for a fine of $270 million and entered into a deferred prosecution agreement. Bank Hapoalim is still in settlement negotiation with the DOJ; in fact, last May, it further increased the funds set aside for a possible DOJ settlement to a total of $365 million.

Contact Sherayzen Law Office for Help With the Voluntary Disclosure of your Mizrahi-Tefahot and Other Israeli Bank Accounts

As part of their settlement agreements, foreign banks agree to supply to the DOJ full information concerning bank accounts owned by US persons. Mizrahi-Tefahot settlement will very likely follow the same path; so will Bank Hapoalim and any other Israeli bank investigated by the DOJ.

This means that if you have undisclosed foreign bank accounts in Israel, you are at a high risk of IRS detection and potentially disastrous FBAR penalties. This is why you need to contact Sherayzen Law Office for professional help with the voluntary disclosure of your Israeli bank accounts. Our law firm specializes in offshore voluntary disclosures of foreign accounts and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

IRS Prioritizes Combating Offshore Tax Cheating | Offshore Tax Lawyer

On March 20, 2018, the IRS announced that offshore tax cheating – i.e. hiding money and other assets in unreported foreign accounts – remains on the IRS “Dirty Dozen” tax scams for the year 2018.

Offshore Tax Cheating: What is the “Dirty Dozen” List?

The IRS uses the “Dirty Dozen” list to describe various scams that a taxpayer may encounter and which form the focus of the IRS enforcement efforts. Some of these schemes peak during the tax filing season.

Illegal scams can lead to significant penalties and even possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

What is Offshore Tax Cheating?

In its most basic form, offshore tax cheating is a long-running scheme that uses foreign accounts to hide money in order to avoid paying US taxes. The taxpayers then use debit cards, credit cards or wire transfers to access the hidden accounts. More complex schemes include the usage of foreign corporations, foreign trusts, employee-leasing schemes, private annuities, insurance plans and other third-parties to conceal the real US owner of foreign accounts.

The most modern offshore tax cheating scheme has involved cryptocurrencies traded overseas and exchanged into a foreign currency by using an offshore account. The IRS has already begun addressing tax evasion based on virtual currencies, but we have not yet seen a fully-developed IRS enforcement in this area.

Offshore Tax Cheating is the Long-Standing Focus of the IRS

The IRS warns that taxpayers should be wary of these schemes, especially given the continuing focus on this issue by the IRS and the Justice Department.

In fact, since mid-2000s, offshore tax cheating has been one of the primary targets of the IRS. The IRS already conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

Every investigation yields important information that is used to learn about noncompliance patterns and commence other investigations. Some of these investigations may focus on bankers and financial advisors who helped set up a scheme that led to offshore tax cheating.

Offshore Voluntary Disclosure as a Way to Settle Prior Tax Noncompliance

If a taxpayer participated in scheme that the IRS may characterize as offshore tax cheating, he should consider doing a voluntary disclosure as soon as possible. It is very likely that the IRS will consider tax noncompliance associated with such a scheme as willful. Hence, the Offshore Voluntary Disclosure Program (“OVDP”) may be the primary choice for such taxpayers.

In fact, according to the IRS, more than 56,400 disclosures were made through various versions of OVDP since 2009. The IRS collected more than $11.1 billion from the OVDP during that time period.

Additionally, more than 65,000 taxpayers who claimed that they were non-willful in their prior tax noncompliance participated in the Streamlined Compliance Procedures. As I stated above, however, a taxpayer should be very careful about participating in the Streamlined Compliance Procedures if he participated in a scheme that the IRS may classify as offshore tax cheating.

OVDP Will Close on September 28, 2018

Taxpayers who wish to participate in the OVDP should consult Sherayzen Law Office as soon possible. The IRS recently announced that the OVDP will close on September 28, 2018.

Contact Sherayzen Law Office if You Wish to do an Offshore Voluntary Disclosure That Involves a Scheme Classified as Offshore Tax Cheating

If you participated in a scheme that the IRS may classify as offshore tax cheating, you should contact Sherayzen Law Office to explore your voluntary disclosure options as soon as possible.

Sherayzen Law Office is a leading international tax law firm that specializes in offshore voluntary disclosures, including OVDP and Streamlined Compliance Procedures. We have helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance with US tax laws, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

IRS Requests Comments on OVDP Information Collection | OVDP Lawyer

On February 28, 2018, the IRS issued a request for comments from the general public with respect to the its OVDP Information Collection practices. Let’s explore this new development in more detail.

OVDP Information Collection: Background Information on the OVDP

The IRS Offshore Voluntary Disclosure Program (“OVDP”) remains today the primary voluntary disclosure route for taxpayers who violated their US international tax requirements willfully. It is also a valid option for taxpayers who wish to avoid the uncertainty associated with the Streamlined Compliance Procedures. This uncertainty often arises with respect to being able to establish non-willfulness and the potential follow-up audit. Finally, given the differences between the OVDP penalty calculation rules and those of the Streamlined Domestic Offshore Procedures (“SDOP”), some taxpayers may find it beneficial to go through the OVDP rather than SDOP.

The idea behind the OVDP is to allow US taxpayers to voluntarily disclose their prior noncompliance with US international tax requirements, including FBAR, in return for a fixed, lower penalty. One of the great benefits of the OVDP is that it generally eliminates the risk of a criminal prosecution.

OVDP Information Collection: Forms For Which Comments are Requested

The IRS requests comments for all Forms 14452, 14453, 14454, 14457, 14467, 14653, 14654, 14708 and 15023. In other words, while this request is formally made under the OVDP, it also covers the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Moreover, by including the brand-new Form 15023 (which was just created a few months ago), this request for comments (which supposed should cover only the OVDP Information Collection) also extends to the new IRS Decline and Withdrawal Campaign.

OVDP Information Collection: Requested Comments

The IRS requests comments on five matters related to the OVDP Information Collection, SDOP, SFOP and Form 15023:

“(a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.”

OVDP Information Collection: Deadline for Comments

The IRS requests that all written comments be received on or before April 30, 2018.

Contact Sherayzen Law Office for Professional Help With OVDP and Other Offshore Voluntary Disclosure Options

If you have undisclosed foreign accounts and foreign income, you should contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers to resolve their prior US international tax noncompliance, and we can help You!

Contact Us Today to Schedule Your Confidential Consultation!