And the IRS demands to know where all the people foreign accounts are located --- it is a crime to keep these foreign bank account secret if they are over $10,000.00 in value. For those people in non-compliance, the Internal Revenue Service ran two offshore voluntary disclosure initiatives (OVDI). The last one passed on August 31, 2011. For those people thinking what to do, this article talks about their four remaining options.

Option One: Do nothing. You could do nothing and hope that the IRS does not discover the foreign bank account. Perhaps your foreign bank account is at a bank that you believe to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-American passport. Well, it used to be that a bank account's actual owner could be kept anonymous. However, now, the IRS has vastly many more tools than it did previously to find previously unreported accounts.

Here's the thing €" every global banking and financial organization must be in the American marketplace otherwise it would become such a small time player that the foreign bank's corporate board would revolt and replace management --- immediately. Despite everything you may have heard, the American is still by far the largest economy in the world and every global bank must be on the good side of the Internal Revenue Service €" otherwise that foreign bank will be shut out of getting US capital or customers! In order to be on the good side of the IRS is to cough up what the Internal Revenue Service says to cough up. So the foreign bank is really at the mercy of the IRS€¦.meaning so are the banks' account holders. So you see, hiding becomes riskier and riskier. And once the IRS starts seeking a criminal indictment, there is only one option left€¦pay outrageous taxes and the highest penalties and face the significant possibility of real jail time.

Option 2: Renounce citizenship; Leave the country. Do you want to say goodbye to the Internal Revenue Service? There is only one way to do it. That is, to renounce one's citizenship and no longer be a US citizen. The process is complicated. Also, a requirement of proper expatriation is that a citizen has to be in compliance with all tax laws and pay an expatriation tax in order to make it official. If the expatriation is handled improperly, the Internal Revenue Service treats it as a non-event, meaning you are still subject to the jurisdiction of the Internal Revenue Service --- indefinitely. Renouncing your citizenship only gets rid of future tax liabilities, but you have to disclose the existence of undisclosed financial accounts first.

This third way is to simply file amended returns and not mention to the IRS that you are seeking to come clean. This is known as a "quiet" or "soft" disclosure. This is basically a "cheap" alternative and that's is only advantage. But the horrible possibilities are that you may give the IRS a very handy clue to charge you criminally, and if you are caught, you are experience a pain of high penalties and a nasty and real possibility of criminal charges.

The Internal revenue service says that these amended returns are "red flags." Even though the tax returns are amended and back taxes paid, the IRS tells says that foreign account holders will still face penalties and criminal charges. In addition to charging and prosecuting people with undeclared foreign income, the Department of Justice claims that it has also begun prosecution of people whose "Quiet Disclosures" were discovered by the IRS.

The "soft" disclosure option is incredibly risky for several reasons. One reason is that a soft disclosure does not remedy the matter of the taxpayer's non-compliance in FBAR filing; failing to filing an FBAR can be a criminal charge just by itself. As a result simply filing a soft disclosure does not go far enough to eradicate any possibility of criminal charges. In fact, the amended return might --- well here's the terrific dilemma with this option --- it does nothing about the failure to the FBAR. There are still criminal and civil charges that may be pending for failing to file an FBAR, but simply give the Internal revenue service a roadmap to find you.

The forth option is a pre-emptive disclosure and subsequent negotiation of the penalties. If getting sleep at night and not worrying about going to prison is chief concern, there can be no question that this is the best option. Yes, the 2011 initiative expired, but that does not mean a voluntary disclosure can not be filed. The IRS always welcomes offshore disclosures. The only thing that expired was the particular terms of the 2011 OVDI which capped certain penalties.

There are two main requirements. First, the taxpayer cannot already be under audit or investigation. And next, the foreign accounts can't be connected to criminal activity €" think money laundering or drug trafficking. Once these prerequisites are met, criminal charges come off the table and the taxpayer's is sent to the regular civil assessment division for assessment of taxes, interest and penalties. A voluntary disclosure offers reduced penalties and a promise of absolutely no criminal charges. Even though fines and penalties may be significant, that's just a bill, they are meaningless compared to an.

If someone is still wondering what the appropriate course of action is, it is imperative that they only speak to a experienced overseas tax law firm. The attorney-client privilege only applies when speaking to an attorney. The Internal Revenue Service can subpoena nearly anyone else to testify against a taxpayer.

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