The IRS has created the Offshore Voluntary Disclosure Initiative to allow anyone who has offshore banking activity to come on their own to disclose it to the IRS and to pay taxes and penalties on it. Not participating in the Initiative could result in thousands of dollars in penalties alone and criminal charges being filed leaving you a felon. It is better to go through with voluntary disclosure than to come under the IRS’s close examination process.
Here are five tips to help you smoothly go through the Offshore Voluntary Disclosure Initiative and avoid high penalties and criminal charges:
- Honesty – Always be honest with the IRS. Lying to them never works. It only gets you into even more trouble with them. You can start by actually participating in the voluntary disclosure Initiative. This tells the IRS that you are not deliberately running from them or hiding your financial activity from them. Fill out all the forms correctly without tossing numbers down just to fill out the form and get it filed in time.
If at any time the IRS thinks that you are being evasive or not completely truthful with them, the examination of your records will become much more intense. You don’t want this kind of stress in your life. Make it easier with the truth. Having the IRS crawling around your records in such depth will be extremely messy and will be a long lesson to be learned.
- Organized – You should have all your financial records organized and ready to be gone through. As you fill out the forms that are part of the IRS voluntary disclosure, pull straight from your records like you do with your yearly 1040 return. You will need all the information on your financial offshore transactions.
If you have an accountant that handles them for you, they should be able to provide all the information in a summarized format that can help you fill out all the forms. If you don’t have an accountant, you might want to hire one to help you get everything organized in a manner that makes the process smoother. You won’t regret that move.
- Timely – The IRS has a deadline each year for the participation in the Offshore Voluntary Disclosure Initiative. This is a set time and there is no extension. Don’t confuse this with the yearly tax returns that you file by April 15th which does allow extensions. This one is a one shot deal. You will come under strict scrutiny of the IRS and the penalties will be more than you could possibly imagine. Criminal charges could also be included after the IRS goes through all your records. This is one deadline that you can’t afford to miss. As the IRS announces the tax year deadlines, mark it on your calendar and start preparing to meet it.
- Work With Them – Keep a humble attitude and work with the IRS. Answer their questions honestly. Be timely in giving them information. Be accommodating. Any tension that you exhibit or resentment of their questions could have them looking closer at your financial books to see if you are trying to hide anything. Experts always suggest working with the IRS instead of against them. It always works out better for you.
They do not want to put you away. They are just trying to get all the information they need and have everything reported correctly. Work against them and it makes the whole process so much more painful.
- Seek Expert Advice – It is not always easy to understand what is required for the Offshore Voluntary Disclosure Initiative. This is especially true when you are new to it. The names of the forms can be mind-boggling. The stress of knowing what will happen if it is not done right can almost drive you to madness. It can also be unnerving when you feel like something is wrong and you might be asked to pay too much.
- Experts – They know their stuff.
- Experience – They are not fresh out of college. They have experience with taxes, offshore accounts, and the IRS.
- Confidentiality – They respect your privacy.
- Results – All of this combined, gives you results.