And the Internal Revenue Service demands to know where all the taxpayers foreign accounts are located --- it is a crime to keep these foreign bank account secret if they are over $10,000.00 in value. The Internal Revenue Service offered two previous offshore voluntary disclosure initiatives. One in 2009 and the last one in 2011. The last one passed on August 31, 2011. For those people thinking what to do, this article discusses their 4 remaining options.

Option One: Stick your head in the sand and pray that the Internal Revenue Service never catches you. Perhaps your account is at a bank that you think to be "off the radar" or is in a quiet jurisdiction, or under a friend's name, or opened with a non-US passport. Well, it used to be that a foreign bank account's actual owner could be kept anonymous. However, now, the IRS has vastly many more tools than it ever did previously to find previously unreported accounts.

Here's the thing despite what you hear, the US is still by far the largest ecomony in the world and has the richest population by far. Every foreign foreign bank must compete for US customers. And in order to do so, these banks must comply with what the Internal Revenue Service tell them to. Part of being on the good side of the Internal revenue service is to cough up what the Internal Revenue Service says to disclose. As a result the foreign bank is really at the mercy of the IRS.meaning so are the banks' foreign account holders. So you see, hiding behind the shadows becomes riskier and riskier. And once the Internal Revenue Service starts an investigation, there are no option left exceptpay outrageous taxes and the highest penalties and face the significant possibility of real jail time.

Option 2: Renounce citizenship; Leave the country. There is only way to escape the jurisdiction of the Internal Revenue Service taxing authority. That is, to renounce one's citizenship and no longer be a US citizen. The process is complicated. Also, a requirement of proper expatriation is that you have to be in compliance with all tax laws and pay an expatriation tax in order to make it official. If the expatriation is handled improperly, the IRS treats it as a non-event, meaning you are still subject to the jurisdiction of the IRS --- indefinitely . Expatriation may make sense to avoid future tax liabilities , but you have to report the existence of undisclosed financial accounts first.

Option 3: Soft (or quiet) disclosure. One option is to file amended returns, this time including previously unreported income simply filing the returns as if it were simply forgotten income. Doesn't this seems think a fool-proof game-plan? Perhaps one could avoid all those excessive penalties of the OVDI programs?

The Department of Justice states that it has begun prosecutions on people who have attempted soft disclosures. So this option has some serious problems

There are other problems with "Quiet Disclosures." One reason is that they do not address the matter of the taxpayer's failure to report the bank account on the FBAR; failing to filing an FBAR can be a criminal charge just by itself. As a result simply filing a soft disclosure 't go far enough to eliminate any likelihood of criminal investigations. In fact, the amended return may --- well here's the problem with this option --- it does nothing concerning the failure to FBAR forms. There are still criminal and civil investigations that may be pending for failing to file an FBAR, but simply give the Internal revenue service a roadmap to locate you.

Option 4: Pre-emptive Disclosure and Negotiation (" Offshore Voluntary Disclosure Initiative") This is the best option. Even though the time to file under the 2011 OVDI has expired, there is time to act. The only deal that expired on August 31, 2011 was the specific off-the-shelf terms of the 2011 disclosure. It was simply a pre-agreed upon penalty arrangement. The IRS always welcomes voluntary disclosures.

There are two main requirements. First, the taxpayer cannot already be under examination or investigation. And next, the foreign accounts can't be connected to criminal activity like currency laundering or drug trafficking. Once these prerequisites are met, any criminal charges come off the table and the taxpayer's is sent to the regular civil assessment division for assessment of taxes, interest and penalties. A successful OVDI offers reduced penalties and a promise of no criminal prosecution. Even though fines and penalties may be significant, that's just a bill, they are insignificant compared to an .

Such pre-emptive off-shore disclosures and negotiations must be handled by a qualified Offshore tax attorneys, skilled in foreign compliance and delicate Internal Revenue Service negotiations.