TIGTA Identifies IRS Mistakes In Voluntary Disclosure Programs

TIGTA Identifies IRS Mistakes In Voluntary Disclosure Programs

Offshore Voluntary Disclosure and Streamlined Voluntary Disclosure are two programs that can permit a taxpayer to correct mistakes made regarding offshore non-compliance. In recent years, an array of obligations regarding the disclosure of offshore accounts and assets have come into effect or have become more strictly enforced. In particular, Report of Foreign Bank Accounts (FBAR) and Foreign Account Tax Compliance Act (FATCA) have given rise to potentially complex and seemingly contradictory informational report filing requirements. Taxpayers have never been asked to hand over more information to the IRS and U.S. Government as they are today. 

Of course, the best way to handle this obligation is to dutifully comply and to avoid errors and mistakes that can result in enforcement actions by the IRS. However, the IRS does recognize that these programs are still relatively new and complex. Therefore, Streamlined Disclose and OVDP are available to correct mistakes. However, a recent report from the Treasury Inspector General for Tax Administration increases the likelihood that the IRS will engage in significantly more scrutiny regarding voluntary disclosure submissions.

Ted Kleinman is a CPA who can help taxpayers and expatriates satisfy their U.S. taxes and disclosure obligations. At US Tax Help, Ted can review your tax situation and provide on-point guidance to help you maintain or achieve compliance. He can assist taxpayers with the Streamlined Disclosure process. To schedule a free and confidential consultation, call (541) 923-0903 or contact Ted online today.

taxes abroad

Streamlined Disclosure Can Correct Offshore Tax Problems

Streamlined Disclosure is a program that can correct many of the mistakes that have become so common in the post-FATCA era. Streamlined compliance is available to individual taxpayers and the estates of individual taxpayers regardless of whether they are living in the United States or abroad. However, the terms of the program will vary depending on whether your Streamlined disclosure is domestic or offshore. However, all individuals who participate in Streamlined OVDP must certify that their conduct was not willful. Willful conduct is typically considered conduct that involves an intentional or voluntary disregard of a known legal obligation.

 

For taxpayers living in the United States, a small offshore penalty of five percent applies. However, this penalty represents substantial savings over the penalties that can be imposed if the taxpayer does not voluntarily disclose. The Streamlined Disclosure program for taxpayers living outside of the United States is even more forgiving and no offshore penalty applies. If you are living in a foreign nation like Brazil, China, Singapore, Saudi Arabia, India, or others this is clearly a prudent step to achieve compliance with U.S. law.  However, a recent TIGTA report scrutinizing IRS practices likely means that all disclosures will be subject to additional scrutiny. Therefore, avoiding a botched or inappropriate filing is now more important that ever.

tax filing for us expats

TIGTA Says IRS Failed to Impose More than $21 Million in Penalties

In an analysis where TIGTA reviewed  random sample of 100 out of a cohort of 3,182 voluntary disclosure requests that had been denied by the IRS or withdrawn by the taxpayer, the watchdog found a number of problems with the IRS’s handling of the cases. TIGTA found that in nearly 30-percent of the sample, the IRS failed to initiate action against the taxpayer despite the opportunity to pursue penalties for a failure to file FBAR. Extrapolating from this data, TIGTA estimated that practices of this type resulted in a failure to assess about $21.6 million in penalties.

Even more startling, a representative for the IRS emphasized that Streamlined Disclosure and OVDP are still considered “non-permanent” programs and that they would not “exist into perpetuity.” Furthermore, the IRS representative indicated that “FATCA data is expected to open new approaches for the identification and assessment of compliance risks.” What this means for taxpayers is that the window for nearly consequence-free disclosures may be closing. Furthermore, it also means that the IRS is well underway with utilizing foreign account data obtained through institutional and individual FATCA disclosures to identify taxpayers.

Work With an Experienced CPA to Correct Offshore Non-Compliance

If you have made mistakes or errors regarding FBAR and offshore disclosures, work with U.S. tax accountant Ted Kleinman and US Tax Help to correct these errors.  Getting your filing right the first time is more important than ever. To schedule a free and confidential consultation, call (541) 923-0903 or contact Ted online today.