Voluntary Disclosure – Selbstanzeige in the USA

With Experienced Wirtschaftsprüfer und Steuerberater in den USA®
Unreported Foreign Assets – Offshore Tax Noncompliance – Streamlined Filing Compliance Procedures

Voluntary Disclosure in the USA: A Guide to Self-Reporting

Self-Reporting: Your Opportunity for Immunity

Voluntary disclosure, known in German as Selbstanzeige, allows US taxpayers to disclose unreported income or assets without risking criminal prosecution. This process can be complex, so it is advisable to consult with an experienced Wirtschaftsprüfer und Steuerberater in den USA® who can guide you through the entire process and minimize your financial burden.

Our team has extensive experience with voluntary disclosures. We thoroughly assess your situation, identify potential risks, and assist you in preparing and submitting your disclosure. Additionally, we handle negotiations with the IRS and work to reduce your potential tax liability.

Deciding to self-report can be challenging, but with our support, you can manage your tax situation and avoid the risk of criminal prosecution. Contact us today to learn more about voluntary disclosure and how we can help you achieve compliance and peace of mind.

Navigating the US Voluntary Disclosure Process for Unreported Foreign Assets

Resolving US Tax Noncompliance on Unreported Foreign Assets

The Offshore Voluntary Disclosure Program (OVDP) of 2014, which helped US taxpayers rectify foreign asset reporting violations, ended on September 28, 2018. However, the IRS still offers options to address international tax violations and mitigate penalties. This guide explores these alternatives, informing taxpayers on how to correct past mistakes.

Seeking Expert Advice

Navigating IRS disclosure procedures and ensuring correct submissions are complex tasks. We strongly recommend consulting experienced Wirtschaftsprüfer und Steuerberater in den USA® who routinely handle offshore tax matters. They can:

  • Thoroughly assess your situation and risks
  • Determine the most suitable IRS program for your circumstances
  • Ensure the process is executed correctly and documents are prepared accurately
  • Negotiate with the IRS on your behalf if necessary
  • Provide critical advice to demonstrate reasonable cause and good faith
IRS Offshore Compliance Enforcement Priorities and Risks

The IRS continues to aggressively pursue offshore violations through audits, prosecutions, and whistleblower tips. Since 2009, over 1,500 taxpayers have faced criminal prosecution for international tax issues. Negligence poses significant risks of tax penalties and criminal liability.

Burden of Proof on Taxpayers

Taxpayers must demonstrate reasonable cause and good faith to avoid tax penalties. Professional tax advice can help substantiate reasonable cause. Most criminal tax prosecutions stem from civil IRS audits.

Utilizing IRS Streamlined Filing Procedures

Introduced in 2014, the Streamlined Filing Compliance Procedures target taxpayers with unreported foreign income and missing international information returns or FBARs. These procedures offer a more accessible, cost-effective way to meet tax obligations for both US residents and expatriates.

Benefits and Precautions

Streamlined Procedures can minimize penalties for taxpayers acting in good faith. However, incorrect or inaccurate submissions can trigger severe IRS penalties. It is crucial to follow all filing instructions carefully, preferably with expert guidance.

Addressing International Filing Delays

In addition to Streamlined Procedures, the IRS offers other options to address international filing issues, including:

A Closer Look at the IRS Criminal Investigation Voluntary Disclosure Practice

Understanding IRS Criminal Investigation Voluntary Disclosure Practice

The IRS Criminal Investigation Voluntary Disclosure Practice (CI VDP) offers taxpayers who may have committed tax-related crimes the opportunity to voluntarily disclose their past actions and meet their tax obligations without risking criminal prosecution.

Key features of CI VDP:

  • Eligibility: Taxpayers with income from legal sources who have willfully failed to report foreign assets can use the CI VDP. It does not apply to taxpayers already under civil audit or criminal investigation.
  • Disclosure Process: Taxpayers must submit a preclearance request to the IRS Criminal Investigation Division and, upon approval, provide detailed information about their foreign assets, financial institutions, and involved parties.
  • Penalties: Taxpayers can expect civil penalties, including penalties for failing to report FBAR and required information returns. However, participating in the CI VDP allows them to avoid criminal prosecution.
  • Timeliness: Taxpayers must act quickly and voluntarily disclose their offshore tax violations before the IRS initiates an investigation or audit.

By utilizing the IRS Criminal Investigation Voluntary Disclosure Practice, taxpayers can mitigate the risks associated with unreported foreign assets, ensure compliance with US tax laws, and potentially avoid severe criminal penalties.

Understanding the Streamlined Filing Compliance Procedures for US Taxpayers

Correcting Past Violations of US Tax and Reporting Obligations

The Streamlined Filing Compliance Procedures help US taxpayers correct past failures to comply with US tax and reporting obligations regarding foreign investments. Although tax returns filed under these procedures are not automatically subject to an IRS audit, they may still be reviewed.

Overview of Streamlined Filing Compliance Procedures

The IRS offers two distinct Streamlined Filing Compliance Procedures:

Additional Filing Procedures

In addition to the Streamlined Filing Compliance Procedures, the IRS offers other filing options:

Required Forms for Streamlined Filing Compliance Procedures
Risks of Quiet Disclosures and the Importance of Compliance

The IRS strongly advises against “quiet disclosures,” where amended tax returns, late FBARs, and tax payments are submitted without notifying the IRS. Unlike voluntary disclosure, quiet disclosures offer no protection from criminal prosecution. The IRS reviews all quiet disclosures and may impose civil or criminal penalties as appropriate ( IRM 4.63.3).

FATCA Regime and Its Impact on US Tax Compliance

The Foreign Account Tax Compliance Act (FATCA) requires US taxpayers to disclose certain foreign assets exceeding specific thresholds. It also mandates foreign institutions to report US account holders or face a 30% withholding tax on certain US payments.

Since 2020, expatriates must provide their US Tax Identification Number (TIN) to their local banks or risk having their bank accounts closed or frozen.

For more information on the Streamlined Filing Compliance Procedures or FATCA, please contact us at +49 89 2351 3218 or  +1 914 816 1115 (15-23h CET / 9am-5pm EST). We are your Wirtschaftsprüfer und Steuerberater in den USA®.