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Are You Willful or Non-willful Under OVDP?

Offshore Account Update

Posted on September 17, 2014 |

Foreign bank accounts must be reported to the Internal Revenue Service every year when you file your tax returns. If you failed to file the Report of Foreign Bank and Financial Accounts (FBAR), then you are in violation of U.S. tax law and you could face fines, penalties and even prosecution.   

The Offshore Voluntary Disclosure Program allows for you to come into compliance with your obligations and report the accounts you failed to report in the past. However, willful violators and non-willful violators are treated differently. Before you come forward and report your accounts, you need to understand if you will be classified as willful or not. A Boston IRS amnesty attorney can help you to assess your situation to determine whether you will be classified as willful. 

Are You Willful or Nonwillful? 

Forbes recently reported on the potential risks that you face when you voluntarily amend your tax returns and report your offshore accounts under the OVDP streamlined procedures.  

When you try to resolve your tax problems with undeclared foreign accounts by using OVDP, you are going to have to certify under penalty of perjury that your conduct was not willful. Non-willful conduct is defined as conduct resulting from a mistake or from negligence. In other words, your failure to report the offshore account must have occurred as a result of a good faith misunderstanding of your legal obligations or because you made some type of error.  

Boston IRS amnesty attorneys note that most taxpayers who had an undisclosed foreign account likely believe that their failure to report it was not willful. However, the big question is whether the IRS is going to agree that the taxpayer should be classified that way. 

The issue is complicated by the fact that you not only need to certify that your failure to file FBARs was non willful but you also have to “provide specific reasons for your failure to report all income.”  

Married taxpayers who didn’t file FBARs as required have to submit a joint certification and provide their individual, personal reasons why they failed to alert the IRS to their offshore accounts. If a tax preparer or professional advisor prepared the return and/or if the taxpayer relied on the advice of a professional, the name and contact information of the provider as well as a summary of his or her advice also has to be included. 

Unfortunately, for taxpayers who truly did have a nonwillful violation, they often didn’t file FBARs because they simply did not know about the filing requirements. As Forbes points out, it is really hard to prove something (your knowledge of the requirement) did not exist.  How do you prove a negative, and what evidence can you provide to show that you didnt know something?

Answering this question is key to being able to show the IRS your violation wasn’t a willful one. An experienced IRS amnesty attorney can help you to determine whether you will be classified as willful or not and can assist you in submitting the appropriate documentation and evidence to the IRS for OVDP participation. Contact your Boston tax law attorney at Thorn Law group today for more information.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989


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