United States v. Sergio Gardea - 05/10/2018

Tax preparer found not guilty on all 30 counts of preparing false tax returns following a 2 week jury trial today. Mr Gardea was represented by Miami criminal tax lawyer David M. Garvin.

Streamline Options For U.S. Taxpayers with Undisclosed Foreign Financial Assets

The New 2014 STREAMLINED OVDP program affords taxpayers whose non-compliance was through mistake or inadvertence an opportunity to became tax compliant and incur substantially reduced penalties.

If you made a mistake and didn't intentionally (i.e., willfully) fail to pay  taxes or file FBARs the STREAMLINED PROGRAM may be a viable option.

Under this program a 5% penalty is assessed on your qualifying foreign assets.

However, taxpayers interested in this program should  act quickly. Starting  August 4, 2014, if your foreign bank shows up on the naughty list then you will not be eligible for the streamlined program.


IRS Eases Access to Offshore Voluntary Disclosure Programs

The changes give taxpayers who mistakenly failed to report foreign assets a simpler path back to tax compliance.

On June 18, 2014, the Internal Revenue Service (IRS) announced major modifications to the terms of its programs to encourage the reporting of offshore assets. The changes expand two existing programs for those with undisclosed offshore accounts and delinquent taxes. The Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Disclosure Program (SDP) and formalize another program to correct delinquent reporting only.

The newly revised process “opens a new pathway for people with offshore assets to come into tax compliance,” and “reflects a carefully balanced approach to ensure everyone pays their fair share of taxes owed.”  The “new pathway” allows certain US resident and non-US resident taxpayers who failed to report foreign assets to take advantage of a simplified disclosure program that brings them back into tax compliance with substantially reduced or no penalties.

The IRS’ offshore voluntary compliance program has been through numerous iterations over the years. The latest version of the OVDP follows on the success of three earlier disclosure programs aimed at foreign account reporting.  To date, more than 45,000 US taxpayers have taken advantage of the disclosure initiatives, generating approximately $6.5 billion in revenues for the US government.

Commissioner Koskinen mentioned “It’s clear that the days of hiding assets in accounts overseas are coming to an end,” and “There is no reason not to come into compliance.” The IRS’ most recent revisions to the disclosure programs are designed to pressure those who unlawfully hid assets overseas, and who have not previously disclosed, to enter the program immediately. Simultaneously, the program offers a better and less burdensome program for those who made unintentional mistakes in failing to report their accounts. Taxpayers with unreported overseas accounts and assets should be aware of the increasing risks of delay and should discuss the various compliance programs with an experienced tax professional like Mr. David M. Garvin.

Taxpayers’ Options to Return to Compliance

The new IRS 2014 offshore compliance programs offer taxpayers in a variety of circumstances the opportunity to disclose and fix prior tax non-compliance. The IRS offers three options:

(1) the delinquent information return program,

(2) the new Streamlined Disclosure Program (SDP) for US resident and non-resident taxpayers whose conduct is non-willful and

(3) the 2014 Offshore Voluntary Disclosure Program (OVDP) for those who knowingly violated the law.  Each taxpayer’s specific facts and circumstances will determine which of the three options should be selected.

None of these programs are available to a taxpayer who is already under IRS audit or whose non-compliance has been identified by the government. Time is of the essence, particularly in light of the ever-increasing pressures on foreign banks to disclose US account holder information.

Simplified and Expanded Options for the Least Culpable

The delinquent information return program allows taxpayers to file delinquent Foreign Bank Account Reports (FBARs) and other information reporting forms without penalty in cases where there is no unreported income and all taxes were timely paid. The scope of this program is limited because the IRS position has been that even a single dollar of unreported income makes a taxpayer ineligible for a penalty-free disposition. Taxpayers must not be under audit or have been contacted by the IRS regarding the delinquent forms.

If taxes are due, eligibility for the newly revised streamlined program turns on a determination of the taxpayer’s “willfulness,” that is, whether the taxpayer intentionally violated the law in failing to disclose overseas assets and pay applicable taxes. A US resident or non-resident taxpayer who is able to certify that he acted non-willfully (without intent to violate the law) may use the newly revised streamlined procedures. Under the new SDP, a taxpayer must sign, under penalties of perjury, the following statement: “My failure to report all income, pay all tax, and submit all required information returns, including FBARs, was due to non-willful conduct. I understand that non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of good faith misunderstanding of the requirements of the law.”

Participants in the program are also required to explain the reasons for the errors or omissions. A false certification could expose a disclosing taxpayer to potential civil fraud, FBAR and information return penalties, as well as criminal liability. Recently, IRS officials have stated publicly that IRS personnel will review all certifications. If a disclosing taxpayer is selected for audit, either due to a review of the certification or under normal audit selection criteria, the IRS will inquire as to the veracity of the taxpayer’s assertion of non-willfulness.

Under the new SDP, eligible US taxpayers who resided outside the US in any one or more of the most recent three years for which the US tax return due date has passed (2011 through 2013), will not pay any penalties. Eligible US taxpayers who resided in the US during this period must pay a “miscellaneous penalty” equal to five percent of the highest aggregate balance/value of the taxpayer’s foreign financial accounts during the years in the covered tax return period (three years) and the covered FBAR period (six years). The IRS will not impose accuracy-related penalties, information return penalties, or FBAR penalties on participants in the SDP.

The newly revised SDP allows both US resident and non-resident taxpayers to avoid the more complex OVDP process and enjoy reduced penalties while coming into tax compliance. Until now, there was no formal pathway for US residents who unintentionally failed to report foreign financial assets to fix prior non-compliance without entering the time-consuming OVDP with its attendant significant penalties. Taxpayers considering the new SDP should consult with experienced tax professionals regarding the IRS view of willfulness and fraudulent conduct before making a submission, as the definitions are not necessarily consistent with the common understanding of the terms.  Many taxpayers will welcome the expanded and simplified procedures with reduced penalty exposure.

The Need to Act Now

For taxpayers who willfully failed to report their foreign financial assets, or knowingly failed to report income there, the 2014 OVDP is available  and virtually guarantees protection from criminal prosecution, while at the same time providing a cap on the significant civil penalties that could otherwise be imposed. The 2014 OVDP is similar to past program and will remain open indefinitely, but its terms could change at any time. The base penalty is 27.5 % of the highest aggregate value of the foreign bank accounts or value of foreign assets during the disclosure period.

Under the 2014 Program, the penalty will be increased to 50% for any foreign financial accounts that were held at a bank publicly identified as being under investigation or as cooperating with a government investigation. Participants must file eight years of amended returns and other information reporting forms, as well as pay all taxes, interest and accuracy-related and applicable delinquency penalties. The 27.5 % or 50%  FBAR penalty is due at the time the amended returns are filed.

The 2014 OVDP imposes new burdens on participants. Payments and the deadlines for submitting certain documentation have been accelerated. Participants must now include additional information when submitting an application to participate in the OVDP, and must provide all foreign account statements at the time of the amended tax return submission. Because of the availability of the streamlined procedures for non-willful conduct, the potential for reduced penalties under the OVDP (e.g., the five percent penalty for individuals who were unaware they were US citizens) has been eliminated. The IRS has also removed the OVDP guidelines covering the same conduct now incorporated into the delinquent information return program.

Taxpayers Should Contact Professional Advice Immediately
Call us at (305) 371-8101

For US taxpayers who have undeclared accounts, this latest IRS announcement is another significant signal that compliance with US law is unavoidable. When viewed in the context of the US government’s  multi-faceted crackdown on offshore tax evasion, including  recent announcements of inter governmental cooperation around the world, this  announcement reflects the continued retrenchment of bank secrecy laws.

Given the complexity of the evolving offshore compliance initiatives and the risk of increased penalties as banks come under investigation, taxpayers should engage professional advice as soon as possible to discuss the benefits and burdens of the revised programs and to explore whether the new programs may present a workable solution for resolving issues associated with undisclosed offshore accounts. Call us at (305) 371-8101

Click here to see OVDP 2014 FAQ’s

Click here to see Streamline options and questions

Award winning lawyer

Miami Tax Lawyer David M. Garvin
Visit us at the Miami office

200 South Biscayne Blvd.
Suite 3150
Miami, Florida 33131



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