Tax Law Center Blog

The IRS has recently published a useful chart outlining options available to help US taxpayers with offshore interests.

The new IRS chart correctly states that it “recognizes that its focus on offshore enforcement efforts and related disclosure programs has raised awareness among many U.S. citizens about tax filing and information reporting obligations”.  For some of our clients, who are panicking  and are alarmed about their newfound alleged tax violations, the IRS statement is an subdued understatement.

While helpful, the chart may mislead some readers.  “Non-resident U.S. taxpayers with delinquent returns with low risk factors (including tax owed less than $1,000/year)” are advised that they should file delinquent tax returns, including delinquent information returns, for the past three years; and delinquent FBARs for the past six years.  This could be considered a “quiet” disclosure.  In OVDP FAQ #15 the IRS states “Those taxpayers making “quiet” disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years.”  The IRS is contradicting itself.

Also the IRS states elsewhere in its new New Filing Compliance Procedures for Non-Resident U.S. Taxpayers that taxpayers presenting “low compliance risk” defined $1,500 in tax due in each of the years should file delinquent tax returns, including delinquent information returns, for the past three years; and delinquent FBARs for the past six years.  This seems to be a new EZPASS or express OVDP without any penalties.

Taxpayers with higher compliance risk are not eligible for the New Filing Compliance Procedures for Non-Resident U.S. Taxpayers. Such taxpayers will be subject to a “more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program”.  Is this a new alternative to OVDP for Non-Resident U.S. Taxpayers? Our firm intends to fully explore this alternative for our clients and expects to aggressively advocate for a very wide new EZPASS or express OVDP lane for entrants.

In the meantime, despite the IRS’ new helpful chart, our law firm expects unabated aggressive enforcement of the US tax laws, including increased criminal prosecutions and civil audit examinations. We have been advising our clients to expect the unexpected (and the worst) in their tax treatment and disclosure of offshore assets.

Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.