Part III: Offshore Voluntary Disclosure Guide

Part III: Offshore Voluntary Disclosure Guide
In Part III of the 2014 Offshore Voluntary Disclosure Guide, Tax Attorney Anthony E. Parent discuses the costs of complying with the various Offshore Program, including attorney fees, along with the some of the risks associated with not disclosing foreign offshore bank accounts to the IRS.

Offshore Voluntary Disclosure Guide

Offshore Voluntary Disclosure Guide Part II

2014 OVDP/OVDI Guide Part 1

2014 OVDP/OVDI Guide Part 1

When forgiveness of debt will lead to a tax bill

When forgiveness of debt will lead to a tax bill

How It Is Possible for the IRS to Garnish Your Wages So Easily?

It’s a great feeling always when your payday is near and you are ecstatic to get your paycheck. But then, you see the check… and you’re in complete shock. You notice a major portion of your salary is missing! You run to the payroll department to learn what happened. You have been told that the IRS has garnished your salary and further, they inform that you will be left just a few hundred dollars for your expenses. I hear you ask yourself, how can they do this to me all of a sudden? The truth is, the Internal Revenue Service can easily garnish your wages and this article will explain the entire process that the IRS carries out during a wage garnishment. 

Before the IRS starts to take a major portion of one’s salary, they will send number of notices to the taxpayer which pre-warns them about their pending tax dues. You'll find different notices for each and every kind of tax issues. Say for example, you'll get one type of notice for failed tax return filing and another type for non-settlement of your tax payments. If it's an individual tax debt, form 1040 is used and business collection notices are related to an Employee Identification Number (EIN).

For those who do not meet their tax obligations or fail to reply to notices on time, a federal tax lien arises against the taxpayer under Internal Revenue Code 6321. The lien attaches to all the property and also property rights a taxpayer hold. One should note that this lien is not an IRS levy or garnishment. A lien isn't the actual seizure; instead, the lien provides the IRS the legal right to levy property.

Have you received a CP 504 Notice from the IRS? The letter will be cited as “Intent to Levy" and it gives a stern warning to taxpayers with pending dues. The Internal Revenue Service will wait for thirty days from the date of release of the letter and from then on, they have authority to levy your state tax refunds. This notice comes in certified postal mail.

With just the issuance of CP504 notice, the IRS cannot take collection action like wage garnishment. However if you get the Final Notice of Intent to Levy or CP90, it requires immediate attention from you because it is a very serious notice. Don't forget this is actually the last notice you will get and you'll be provided 30 days to respond to it. After that, the IRS is free to levy your wages and bank accounts. 

The IRS keeps a record of all your income details under Wage and Income transcript. It includes your savings account particulars, any 1099s from the prior year, interest income and also W-2s. With all this information, the IRS can easily send notices to all bank accounts, and to all your past and present employers to carry out levy on your income.

So the IRS not only takes money from your salary and bank accounts but additionally their actions affects your social standing too since that every levy they carry-out will be documented in county court house and this details can reach the general public easily. 

It is important to act right away if you get a levy before things get worse. Don't be fearful. Regardless of how big the tax problems you've got, it can be definitely resolved. Act quickly enough and there is a great chance we can get that IRS levy or wage garnishment released.

Common Myths Related to the IRS Tax Settlements

With years of experience in resolving various tax problems, it is time for me to explore the common myths surrounding the IRS tax settlement. So if you or someone you know owes taxes to the IRS, just do everyone a favor and read the following top tax settlement myths. 

Bankruptcy isn't an option in settling back IRS taxes

It is true that you can file personal bankruptcy, but there are myriad rules to be followed. Within Chapter 7 bankruptcy, all old 1040 tax returns could be fully discharged even if there are tax liens against your home.  

Tax resolution lawyers can wave a magic wand and cut down my taxes and penalty charges

No, this is not correct. An individual in sound financial standing cannot avoid paying the IRS taxes without good reason, and as a matter of fact, these people should pay the required taxes in full. Also, be careful of those fraudulent firms who claim to lower your penalty charges and interest automatically, as there is no such type of procedure in the IRS. 

IRS tax settlement firms are really fraudsters

There are some people who think that all tax settlement companies are a complete scam. We know that this is not true. Whenever someone comes to us, we provide tax consultation for a fixed flat fee. Someone then tells them that they could get it done cheaper or can choose to do it themselves or by a regular CPA. Then, a year later, they come to us again and say, “I wasted a year and lots of money by not hiring you... Will you help me now?” You have to be very careful not to fall victim to scam companies, and you should only get involved with an established firm where tax consultation is not a hobby. 

The IRS filed a tax lien against the properties which are in my spouse’s name

Tax liens could be filed against any of your properties. Unlike judgment liens, the IRS doesn’t need a court ruling to file a federal tax lien. Therefore, if a tax lien is addressed to your spouse’s property, it doesn’t mean that there is a lien against the property.

The IRS can't do anything if I don't open their letters

It doesn’t matter whether you open the IRS’s letters or not, as they can enforce a collection action after specific time frame. Furthermore, you may lose right to tax court and important appeal rights if you don’t open the letters. 

The IRS must produce a court order to levy my wages or bank accounts

No, they don’t. The IRS will send you 3 letters, and if no action has been taken by you, they’ll just wait thirty more days after the final letter has been sent. After that, they have full rights to levy your wages. 

If I simply get rid of my assets by gifting to my friends and family, the IRS can’t touch me or my property

The IRS will consider this approach as fraudulent, and they are allowed by law to disregard the gift. Second, it will take extra work for the IRS to undo the fraudulent conveyance, and this definitely will anger them further. 

It’s a daunting task for many people to get their IRS tax settlement accepted. That’s why we have created a free comprehensive guide, “7 Steps to Sanity,” which provides full guidance in reaching the best possible settlement. Just enroll now to receive your copy.

           

Frequently Asked Questions about IRS OVDP Opt-out Process

The most confusing aspect of the current OVDP is definitely the “opt-out” procedure where several unanswered questions remain among the individuals. Below are the answers to some of the commonly asked questions about the OVDI opt-out procedure.

1. Will I be criminally charged by the IRS if I opt-out of the OVDI?

No, not really. The key reason why there is confusion is the fact that when you opt-out of the OVDP, you actually aren't opting out of the OVDP. Yes, that is correct.

Opting out of the OVDP is not going to increase the risk of criminal prosecution, because what you opt-out of is the standard penalty cap which varies according to the highest balance in the offshore accounts. For the majority of taxpayers, the penalty will be 27.5% of the highest aggregate value in overseas accounts however, you may become eligible for 12.5% penalty if the highest balance is less than $75,000 or if you meet certain conditions. Therefore you just opt out of the penalty cap and never out of your entire OVDP.

2. Will I have to pay additional penalty if I opt out?

Yes! There is a possibility. But we haven't come across it yet. The Internal Revenue Service has told us, they don't want to punish anybody who using the OVDP. These are definitely, in the IRS’ view, the people doing “the right thing.” Some might be charged more, not because of the OVDI, but only if the individual gives the IRS a hard time.

3. Exactly how many opt-out cases are successful?

Compared to other available options, the opt-out is a pretty new program, at least in IRS years. Right until now, not that many successful opt-outs has taken place for the ones that was submitted in 2012. Since the IRS is quite interested in centralizing the opt-out decision, delay in approval looks inevitable. So there's no big surprise to see several cases in queue for getting 5% penalty approval.

The Internal Revenue Service miscalculated regarding who is going to mainly make use of the OVDP program. The IRS overestimated the number of intentional tax evaders while underestimated the innocent filers since they become the big users of the opt-out program. This seems to have further slowed the whole process. 

4. Can I appeal against OVDP penalty?

Yes, you can. Inside the OVDP program, an opt-out gives several appeal rights for you. However outside the program, the IRS can charge multiple 50% penalties which could eliminate your entire assets within seconds. This has occurred before and the IRS agency threatens to do a lot more.

5. For small cases, OVDI appears to be overkill. Why don’t I simply carry out a 'soft’ disclosure?

The final decision to enter into this program is entirely yours. However do not forget that there is a possible danger of FBAR review if you don't want to get involved in this program. There might not be felony charges (although it can be carried out) however, if caught in a FBAR audit, the results could be disastrous.

A 'soft’ or ‘quiet’ disclosure to us, is not a sensible option. Using its vast data collecting tools, the IRS already has identified about 10,000 persons and businesses that have made soft disclosures. The IRS says they will track down all of those who have made 'quiet' disclosure. Sometimes, we might feel the law is unfair. Though it is hard to accept, the best thing to do right now is to simply follow the rules.

6. If I made a ‘soft’ disclosure can I still make use of the OVDI?

Indeed, you can and you should. To repeat, the IRS has discovered 10,000 people who they suspect of making a 'quiet' disclosure. And these numbers belong just to the accounts over $1,000,000. It will become a lot higher if they start to look into the accounts with balance under $1,000,000.

7. How much the whole process will cost me?

Making a voluntary disclosure can help you to become tax complaint, but to take a best decision, you must know about how much cost involved to go through the entire OVDP process. And that includes accounting and lawyer fees. Our law firm follows the flat fee model for our different tax resolution services. While we can guarantee our flat fee, we can’t keep on top of the IRS. All we can actually do is guiding you to take right steps at the right time. If you have reasonable cause, the prospect of receiving favorable result is much higher.