Wednesday, June 25, 2014

Whether or not you should have joined OVDP to start with requires nuanced consideration of all your facts.‏

The steps OVDP usually takes are: (1) preclearance request and approval (Step 1); OVDP intake letter and approval (Step 2); and (3) complete package submission (original returns, amended returns, delinquent or amended FBARs, etc).
But assuming that you are comfortable that the risks of the willful penalty are acceptable to you, then just taking the regular audit when and if it occurs -- and however it occurs, whether by OVDP opt out, QD or GF -- seems like an acceptable strategy.
A QD to be effective must not itself be a criminal act. For example, one should not file amended returns reporting less than all income from foreign accounts (or not correcting other errors on the original return) or file a delinquent FBAR reporting less than all foreign accounts, which means a materially and knowingly false amended return creates more problems than it solves.
To join or not that is the single biggest issue in this area and only if that a conclusion can be reached that risk of criminal prosecution is low should one not go into OVDP. But reaching that conclusion requires a lot of digging into the facts and a lot of judgment once all relevant facts are known.
If you get satisfied that you have no material risk of criminal prosecution so that you will not achieve the principal benefit of OVDP, you can analyze now as to whether you have material risk of civil penalties in excess of the penalties in OVDP.  If that question is answered yes, then get into OVDP and do not opt out. If that question is answered no, then you have potential options -- all involving audit results -- whether those audit results come from OVDP opt out, QD audit, or GF audit.
To trigger an audit, the IRS would have to focus on earlier years (years prior to the go forward implementation years). I suppose that the FBAR required in the go forward might trigger an FBAR audit, because the IRS (as managers of the FBAR system for Treasury) might pick up the first time filing. I don't think anyone can give you any real assessment of the real risk of prosecution. I am not aware of any formula that the IRS and DOJ have with respect to prosecutions, other than the Government does not usually prosecute low tax due cases because convictions are more difficult and meaningful sentences -- driven principally by tax loss -- are not given in tax cases.
http://federaltaxcrimes.blogspot.ch/2014_06_01_archive.html

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