The new offshore disclosure framework has once again provided a disclosure option for taxpayers who wish to protect themselves from criminal liability for their undisclosed offshore accounts. However, the Streamlined Filing Compliance Procedures still offer a good alternative for many taxpayers who are able to certify that their conduct was not willful.
Each of these programs has its own costs and benefits, so consult a tax attorney to determine which is the better option for your situation.
Avoid Criminal Exposure
If you can’t certify that your failure to report foreign income or file Foreign Bank Account Reports (FBARs) was non-willful, you can’t use the Streamlined Filing Compliance Procedures. The issue of willfulness is complex and should be evaluated by a tax attorney.
The Streamlined Procedures don’t offer protection from criminal prosecution. Therefore, if you want to be protected from criminal liability, you should use the new offshore disclosure framework instead.
Lower Penalties
The Streamlined Procedures have a much lower penalty assessment. Domestic taxpayers must submit a penalty equal to 5 percent of the highest aggregate account balance during the disclosure period. This penalty is waived for taxpayers who live overseas.
The new offshore disclosure framework has a much less forgiving penalty structure. Taxpayers can face civil fraud penalties, the full amount of willful FBAR penalties, and potentially other penalties as well.
There’s also much less certainty as to what the total penalty assessment with be under the new offshore disclosure framework. IRS examiners can assess penalties on a single tax year or the full six-year disclosure period, which can be a very large difference.
Technical Requirements
The flexibility of the new offshore disclosure may work to the benefit of some taxpayers. For example, the Streamlined Procedures are only available to taxpayers who have filed returns for the past three years. A taxpayer who has unfiled returns may use the new offshore disclosure framework instead.
The new framework allows taxpayers to argue that they should only be subject to the less severe non-willful FBAR penalties in some cases. This could result in a much lower overall penalty assessment.
The best disclosure program for you will depend on the facts of your case, your risk tolerance, and other factors that should be discussed with an offshore disclosure attorney.
The Gartzman Law Firm can find the best offshore disclosure option for your situation. Use our contact form to request a consultation with an Atlanta tax resolution attorney.