When it comes to IRS Voluntary Disclosures and the analysis of foreign financial assets, Kevin E. Thorn, Managing Partner, and former IRS tax lawyer of the Thorn Law Group, is considered the leading IRS tax attorney in Virginia. For over twenty-five years, he and his highly regarded tax law firm, Thorn Law Group (TLG), have overseen thousands of IRS Voluntary Disclosure Program (OVDP) cases for clients in Virginia and the DMV. He has successfully defended clients in IRS Voluntary Disclosure cases in proceedings before Virginia courts, the IRS, the IRS Appeals, the IRS Criminal Division (CID), the United States Tax Court, the Civil and Criminal Divisions of the U.S. Department of Justice, and in the majority of federal courts across the country.

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Mr. Thorn and his law firm have experience representing clients in IRS Voluntary Disclosure Programs in Virginia, across the U.S. and globally. His firm excels in resolving complex civil and criminal tax matters for diverse clients, including small to medium-sized businesses, executives, high-net-worth individuals, professionals, banks, trusts, and cryptocurrency holders in Virginia IRS Voluntary Disclosures and other tax matters. He and his firm have overseen IRS Voluntary Disclosures involving offshore bank accounts, foreign insurance policies, hedge funds, cryptocurrencies, precious metals, and other assets.

What is the IRS Voluntary Disclosure Program (OVDP) in 2024 and How Can a Virginia Tax Lawyer Help You Today?

The 2024 IRS Offshore Voluntary Disclosure Program (VDP) allows qualified American taxpayers to comply with U.S. tax laws and avoid potential IRS criminal investigations or severe civil audits for undisclosed offshore assets. It mandates reporting foreign bank accounts and financial assets to the IRS, preventing harsh penalties, and avoiding possible incarceration if discovered during an IRS audit or IRS criminal investigation.

Participating in the 2024 IRS Voluntary Disclosure Program reduces financial obligations and eliminates the risk of criminal charges, provided taxpayers work with experienced Virginia tax attorneys like Kevin E. Thorn and his team at the Thorn Law Group. Administered by the IRS Criminal Investigation Division, the IRS Disclosure Program incorporates 2018 modifications and accommodates the 2014 Streamlined Filing Compliance Procedures. Due to its complexity, consulting with a knowledgeable former IRS tax attorney and a Virginia attorney is recommended for navigating nuances across IRS disclosure programs (OVDP, VDP, IRS Streamlined Procedures, etc.).

Thorn Law Group offers initial private consultations to address individual or business offshore disclosure concerns, having successfully saved billions in taxes, penalties, and interest for clients in Virginia and nationwide.

What is the 2024 IRS Offshore Voluntary Disclosure Program (OVDP) Background?

The IRS initially launched the most recent edition of the disclosure program that is currently called the IRS Offshore Voluntary Disclosure Program in 2009. The program underwent multiple changes prior to its expiration in 2018. As previously mentioned, (and elaborated upon below), the IRS has provided U.S. taxpayers with the option to voluntarily reveal their undisclosed foreign accounts and assets through alternative channels in consultation with a skilled Virginia tax lawyers and IRS tax attorney. Today, it is crucial to remember that it is illegal to exclude information about an offshore bank account or other foreign financial instrument on your tax return or to fail to file a Foreign Bank Account Reporting Form (FBAR), which entails severe fines and imprisonment. That is why it is important to hire an experienced Virginia IRS tax attorney to make sure that the attorney-client privilege is always in place, and that your legal rights are protected.

The History of IRS Voluntary Disclosures for Foreign Assets:

2009 - The Beginning of the IRS Voluntary Disclosure Program: Virginia Tax Attorneys

The first IRS OVDP ran from March to October 2009, during which over 15,000 U.S. taxpayers made voluntary disclosures. The program resulted in the IRS collecting billions of dollars in overdue taxes, fines, and interest. Participants were required to pay back taxes, interest, an accuracy-related penalty, and a miscellaneous penalty, which could reach up to 20% of the highest aggregate balance of their undisclosed offshore accounts over the previous six years. This hefty penalty was imposed despite many taxpayers inadvertently failing to report offshore assets or file an FBAR (Foreign Bank Account Reporting Form) previously.

Before 2009, the FBAR form was rarely enforced and unknown to tax preparers. Originally aimed at combating serious crimes like drug trafficking and terrorism, its enforcement gradually expanded to identify individuals and entities not disclosing international financial accounts or income. The complexity and large-scale participation in the 2009 IRS Voluntary Disclosure Program necessitated the expertise of skilled Virginia tax litigation attorneys, such as those at Thorn Law Group in Tysons Corner. These attorneys spent years resolving cases to minimize penalties and, in rare cases, prevent incarceration for their clients.

2011 - IRS Voluntary Disclosure Program Revival for clients of Virgina Tax Lawyers

The IRS reintroduced the OVDP in 2011 as the Offshore Voluntary Disclosure Initiative (OVDI), making modest adjustments from the original program. One notable change was the "miscellaneous" penalty, set at 25% for taxpayers with total foreign account values exceeding $75,000 and 12.5% for those below this threshold. Despite similarities to the original OVDP, the new IRS Voluntary Disclosure Program introduced additional complexities and nuances.

These adjustments posed challenges for Virginia tax lawyers and IRS tax attorneys and taxpayers alike, lengthening the resolution process for cases involving offshore bank accounts. The increased penalty and fluctuating value thresholds led to more IRS audits, heightened litigation, and difficulties in case resolution. The program resulted in a backlog of unresolved cases at the IRS, with collections significantly lower compared to the 2009 disclosure program.

2012 - The IRS Voluntary Disclosure Program Changes effect the Representation of clients for Virginia Tax Lawyers

After the OVDP ended, the IRS returned to its 2009 Voluntary Disclosure procedures, sparking debates among IRS and private tax attorneys. Despite this, tens of thousands of taxpayers annually joined the IRS Voluntary Program, keeping the 2012 IRS Voluntary Disclosure Program ongoing. Virginia tax lawyers became adept at guiding clients through account disclosures and penalty navigation.

From 2012 to 2018, the IRS Voluntary Disclosure Program operated more smoothly, efficiently resolving cases, and ensuring tax compliance. However, IRS changes, such as raising the maximum penalty to 27.5%, initially posed challenges. Subsequent adjustments decreased penalties, prompting more voluntary disclosures and more work for IRS and Virginia tax attorneys.

In 2014, the IRS streamlined the OVDP, offering eligible individuals a reduced 5% penalty under the IRS Streamlined Program. This simplified process required three years of amended tax returns and six years of FBAR filings. The IRS Streamlined Filing Procedure became popular among Virginia tax attorneys as an effective method to assist clients with foreign bank account disclosures.

2014 – Virginia Tax Attorneys and IRS Tax Attorneys March Forward with IRS Streamlined Disclosure Program

The IRS introduced the IRS Streamlined Program as a response to negotiations with tax attorneys, offering a reduced penalty of 5% compared to the previous 27.5% under the IRS Voluntary Disclosure Program. Participation requires taxpayers to sign a perjury statement without future assurances. Inaccurate submissions may prompt IRS investigations.

Since its 2014 launch, the IRS Streamlined Program has been widely embraced, leading to a significant increase in IRS Voluntary Disclosures. It remains the preferred choice for taxpayers disclosing undisclosed offshore financial holdings, with over 99% utilization in the past year.

Alternatively, the IRS Voluntary Disclosure Program, also effective since 2014, imposes a penalty of about 50% and offers a Form 906 Closing Agreement for protection against severe audits or criminal prosecution. Specific criteria include amending six years of tax returns and paying owed taxes.

Taxpayers with foreign financial institutions under IRS scrutiny may require the full IRS Voluntary Disclosure Program instead of the Streamlined Program. Each case is unique, necessitating consultation with an experienced IRS disclosure tax lawyer to navigate complexities and optimize tax outcomes.

2018 – Virginia Tax Attorneys see the end of the IRS Voluntary Disclosure Program

The IRS ended the OVDP in 2018 due to low taxpayer participation, including from green card holders and resident aliens. Despite this, IRS Voluntary Disclosures for offshore accounts and foreign financial assets continue through various ongoing programs. The IRS's Streamlined Filing Compliance Procedures and the IRS Criminal Investigation's Voluntary Disclosure Practice replaced the OVDP and remain active, though with substantial penalties that can exceed 50% in potential criminal cases. These programs, along with national IRS Voluntary Disclosure procedures, help U.S. taxpayers catch up on overdue taxes and achieve compliance. Tax attorneys in Virginia assist clients with these programs, which have grown in popularity since 2018, especially the IRS Streamlined Program, which has become a primary resource for tax compliance regarding undisclosed foreign assets.

Additionally, since the enactment of FATCA in 2014, many foreign banks now facilitate U.S. taxpayer compliance by requiring disclosure to the IRS. However, some banks have opted out of serving U.S. clients due to the costs associated with compliance. Despite these challenges, numerous IRS Streamlined filings and voluntary disclosures continue, helping U.S. taxpayers return to tax compliance regularly.

2024 - IRS Voluntary Disclosure Program is in Full Swing for Virginia Tax Attorneys

U.S. taxpayers with undisclosed offshore financial assets can still choose to comply voluntarily by either filing an IRS Voluntary Disclosure or using the IRS Streamlined Filing Compliance Procedures, despite the expiration of the 2018 OVDP after five years. The IRS Voluntary Disclosure Program under the criminal division is for those correcting willful tax law violations, whereas the 2014 Streamlined Filing Compliance Procedures are tailored for non-willful taxpayers with foreign financial accounts.

IRS Voluntary Disclosure Programs aim to effectively assist Virginia taxpayers in achieving full tax compliance. It is crucial for individuals to consult with a knowledgeable Virginia Tax Attorney and IRS Voluntary Disclosure tax lawyer before making any disclosures. Distinct options exist for Virginia citizens, resident aliens, and green card holders to regain tax compliance, especially important for green card holders aiming for U.S. citizenship.

The 2024 IRS Offshore Voluntary Disclosure Program (OVDP): What is it?

In 2018, the Offshore Voluntary Disclosure Program (OVDP) concluded, but its terminology remains in common use. As of 2024, "OVDP" could refer to either the IRS Criminal Investigation's Voluntary Disclosure Practice (VDP) or the IRS's Streamlined Filing Compliance Procedures, or potentially both.

However, it is important to understand that the VDP and Streamlined Procedures are distinct programs. They each have unique eligibility criteria and consequences for unsuccessful applications. Importantly, they carry specific conditions, tax, interest, and penalties. Therefore, taxpayers with undisclosed offshore accounts should seek guidance from both an experienced Virginia Tax attorney and IRS Criminal tax Voluntary Disclosure attorney in Virginia to navigate their individual legal circumstances effectively and achieve the best possible outcome.

What Are the 2024 IRS Voluntary Disclosure Streamlined Filing Compliance Procedures?

The primary replacement for the IRS OVDP has been the IRS's 2024 Streamlined Filing Compliance Procedures. The IRS states that "[t]he streamlined filing compliance procedures… are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.” The substantial decline in OVDP filings between 2011 and 2024 can be partially explained by the availability of the Streamlined Filing Compliance Procedures since 2014.

The parties with access to the 2024 Streamlined Filing Compliance Procedures ("Streamlined Procedures") are individual taxpayers, their estates and possibly businesses. The Streamlined Procedures are available to both domestic U.S. taxpayers and foreign residents in Virginia as well as other states and residents outside the U.S.; however, foreign residents' filing requirements differ from domestic taxpayers. But the fundamental qualifying requirements are the same regardless of the taxpayer's place of residence. Among them are:

• The taxpayer must certify under penalties of perjury that his or her offshore financial account disclosure violation was non-willful.
• The taxpayer must not currently be the subject of an IRS audit or civil examination (whether related or unrelated to the taxpayer’s offshore accounts).
• The taxpayer must have a valid Social Security Number (SSN) or other valid Tax Identification Number (TIN).

What Distinguishes the 2024 IRS Streamlined Filing Compliance Procedures from the 2024 IRS Voluntary Disclosure Program (OVDP)?

There are several major differences between the former OVDP program and the IRS’s current Streamlined Filing Compliance Procedures. This includes differences that make the Streamlined Procedures both more desirable and less desirable in different respects.

The main differences between the 2024 IRS OVDP (Offshore Voluntary Disclosure Program) and the 2024 IRS Streamlined Filing Compliance Procedures can be summarized as follows:

• Eligibility and Intent:
  • OVDP: Allowed both willful and non-willful violators to correct offshore account disclosure issues.
  • Streamlined Procedures: Only available for non-willful violations. Taxpayers must attest that their failure to disclose was unintentional.
• Applicability:
  • OVDP: Open to individual taxpayers, businesses, partnerships, and trusts.
  • Streamlined Procedures: Limited to individual taxpayers, estates and in limited situations businesses.

• Penalties:
  • OVDP: Penalties could be severe, up to 50% of the undisclosed account balances.
  • Streamlined Procedures: Maximum penalty is 5% of the undisclosed foreign account balances. However, additional civil penalties may apply for non-compliance.
• Criminal Prosecution Protection:
  • OVDP: Provided protection from criminal prosecution for tax fraud related to offshore accounts, with a closing agreement.
  • Streamlined Procedures: Do not provide the same level of protection. Taxpayers could face criminal charges if found to have willfully neglected to report offshore accounts, despite certifying otherwise.

2024 IRS Voluntary Disclosure Program: What Does Willful vs. Non-Willful Conduct Mean?

"Willfulness" is a crucial component of the IRS's Streamlined Filing Compliance Procedures. The IRS Streamlined Procedures are available to residents of Virgina and other U.S. taxpayers who have committed non-willful disclosure violations, but not to those who have committed willful violations.

If a taxpayer knows they must declare their offshore accounts but chooses not to, that is deemed a deliberate violation of federal law on offshore account disclosure. "Intentional" and "willful" are synonymous when it comes to qualifying for the 2024 IRS Streamlined Procedures. The scheme is meant to provide American taxpayers with some relief when they commit sincere errors. A taxpayer is not qualified to make an IRS simplified filing if they are aware of the requirement to declare offshore accounts, or if they have reasonable suspicion that they are aware of the responsibility to disclose overseas accounts.

U.S. taxpayers and Virginia residents who have deliberately concealed their offshore accounts are only able to file a voluntary disclosure under the 224 Voluntary Disclosure Practice of the IRS Criminal Investigation. If this is the case, it is highly recommended that a Virginia tax lawyer and former IRS tax attorney with many years of experience in the various IRS Voluntary Disclosure Programs be hired.

In 2024, What is Considered an Offshore Bank Account in the IRS Voluntary Disclosure Practice and the 2024 IRS Streamlined Filing Compliance Procedures?

In 2024, under the Foreign Account Tax Compliance Act (FATCA), there is a requirement to report offshore accounts and foreign financial assets to the IRS. U.S. taxpayers are required by FATCA to report any bank accounts they hold with foreign financial institutions that have a value greater than a specific threshold. Foreign financial institutions include:

• Banks
• Mutual Funds
• Private Pensions
• Hedge funds and private equity funds
• Certain types of insurance companies that offer cash-value products or annuities.

Note, the IRS’s definition of foreign financial institutions excludes both (i) foreign branches of U.S. banks, and (ii) branches of foreign banks located in the United States.

If a resident of Virginia has a bank account (or multiple accounts) with one or more foreign financial institutions outside the U.S., then the Virginia taxpayer has an obligation to disclose the account (or accounts) to the IRS if either of the following thresholds are satisfied:

• For Individual Taxpayers – The taxpayer’s offshore accounts exceed $50,000 in aggregate value at the end of the tax year or exceed $75,000 at any time during the tax year.
• For Married Taxpayers – The taxpayer’s offshore accounts exceed $100,000 in aggregate value at the end of the tax year or exceed $150,000 at any time during the tax year.

Foreign-residing American taxpayers are subject to higher reporting thresholds ($200,000 aggregate value at year-end or $300,000 aggregate value at any time throughout the year for single filers and double these criteria for married taxpayers filing jointly).

The disclosure of all offshore accounts held by a taxpayer and Virginia resident is required if any of those accounts meet one of the FATCA disclosure thresholds. At the conclusion of a tax year, for instance, if a taxpayer has three offshore accounts valued at $40,000, $10,000, and $5,000 each, they are required to reveal all three accounts even though the $5,000 account does not contribute to surpassing the $50,000 aggregate disclosure threshold.

What is Considered Tax Compliance Under the Current IRS Voluntary Disclosure Programs in 2024?

U.S. and Virginia taxpayers must timely disclose their qualified offshore accounts on an annual basis to be deemed in compliance with FATCA. Additionally, U.S. taxpayers are required to make restitution on any past disclosure violations by using the 2024 IRS Criminal Investigation's Voluntary Disclosure Program or the IRS's 2024 Streamlined Filing Compliance Procedures. In addition, FBAR compliance is a crucial component of IRS offshore disclosure compliance. Many U.S. taxpayers are required to file the Report of Foreign Bank and Financial Accounts (FBAR) required by the Financial Crimes Enforcement Network (FinCEN) in addition to complying with FATCA. All taxpayers are subject to the same reporting requirements and thresholds, however the FBAR filing obligation has a significantly wider scope than the FATCA requirements.

2024 IRS Tax Compliance for Individual Taxpayers:  FATCA vs. FBAR

"Specified individuals" are subject to the FATCA requirement to reveal offshore accounts. This covers taxpayers whose offshore accounts have values more than the previously mentioned thresholds for aggregate value. All Virginia resident and U.S. citizens and resident aliens of the U.S. whose total worth of foreign financial accounts exceeds $10,000 at any point in the calendar year are required to file the FBAR.

In 2024, How Can Businesses Become IRS Tax Compliant?

"Specified domestic entities" in Virginia and other states that have an interest in foreign financial accounts that satisfy the reporting threshold are likewise subject to FATCA. All kinds of business enterprises are included in this. The reporting thresholds for businesses are $50,000 aggregate worth at the end of the tax year or $75,000 aggregate value at any time throughout the tax year, much like for individual taxpayers. For domestic entities with foreign financial accounts with a total value greater than $10,000 at any point in the calendar year, the FBAR filing requirement is applicable. As a Virginia resident or business owner, and given the complexity of these laws, it is especially important to hire a Virginia tax attorney with experience in the various IRS offshore Voluntary Disclosure Programs.

2024 IRS Tax Compliance for Trusts

For FATCA compliance reasons, trusts are likewise regarded as "specified domestic entities," and therefore are subject to the same FBAR filing requirements as companies. A knowledgeable Virginia IRS criminal tax attorney who is familiar with the ins and outs of the federal disclosure and compliance regulations should be hired to analyze a trust for FATCA and FBAR filing purposes.

2024 IRS Tax Compliance for Foundations

Like trusts, foundations are regarded as "specified domestic entities" and are required to comply with the FATCA and FBAR filing requirements for businesses. Once more, the government compliance and disclosure requirements for both FATCA and FBAR are extraordinarily complex and call for the help of a knowledgeable Virginia tax attorney.

What Information Must be Disclosed Under the IRS 2024 Voluntary Disclosure Programs?

2024 Domestic IRS Streamlined Filing Procedures

For Virgnia residents and all other U.S. taxpayers residing domestically, the forms, the information, and payment required when making a 2024 IRS voluntary disclosure pursuant to the IRS Streamlined Procedures include:

• IRS Form 1040X, Amended U.S. Individual Income Tax Return.
• Any required information returns (i.e., IRS Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621).
• “Streamlined Domestic Offshore” is written in red at the top of the first page of each return;
• IRS Form 14654, Certification by U.S. Person Residing in the U.S.
• Payment of all taxes due; and,
• Payment of the “miscellaneous offshore penalty.”

2024 International IRS Streamlined Filing Procedures

American taxpayers residing overseas are required to use a separate set of 2024 IRS Voluntary Disclosure forms to provide the same basic information and pay any outstanding balances.

The 2024 IRS Voluntary Disclosure Program (VDP)

For U.S. taxpayers addressing intentional IRS disclosure violations, the process is rigorous and requires thorough documentation of assets, accounts, and taxpayer details over multiple years. It begins with completing Part I of IRS Form 14457, the Voluntary Disclosure Practice Preclearance Request and Application. Upon IRS Criminal Investigation agent review and pre-approval, applicants proceed with Part II within 45 days.

The process demands readiness to provide additional documents as requested and acknowledges the possibility of application denial by the IRS Criminal Division. Given the risks involved, taxpayers seeking protection under the VDP should seek guidance from a skilled Virginia tax attorney with IRS Voluntary Disclosure tax experience.

What Are 2024 IRS Penalties for the IRS Disclosure Program (OVDP)?

Failure to report overseas financial holdings as required by FATCA can result in severe penalties for U.S. taxpayers. Penalties can reach up to $60,000 per year per infraction, starting at $10,000 for each unfiled return and potentially increasing by $10,000 for every 30 days of non-filing after IRS notice, up to the maximum $60,000 penalty. Failing to file an FBAR for offshore bank accounts can incur fines up to 50% of the largest balance in the undisclosed accounts, beginning at $10,000 per unfiled form, compounded annually. Taxpayers can rectify filing errors through a voluntary disclosure under the IRS Streamlined Filing Compliance Procedures, significantly reducing penalties to 5% of the account balance for one year, and sometimes avoiding penalties altogether.

However, voluntary disclosures through the 2024 IRS Streamlined Procedures do not guarantee immunity from criminal charges for failing to report offshore accounts. Taxpayers facing allegations of criminal tax fraud may still be liable for additional fines and potential federal prison sentences and require the help of a Virginia tax attorney.

When shouldn’t an IRS Voluntary Disclosure be Used, and are there Other Options?

When considering whether to use the 2024 IRS Offshore Voluntary Disclosure Program, U.S. taxpayers should consider several key factors:

Applicability 2024 IRS Streamlined Procedures - The IRS Streamlined Filing Compliance Procedures are specifically for U.S. taxpayers who have not reported foreign financial assets as required under FATCA. It cannot be used if there are other federal tax liabilities, and if the Virginia taxpayer is not in Federal and state tax compliance.

Non-Willful Violations - The 2024 IRS Streamlined Procedures are available only for taxpayers who have non-willfully violated tax laws. This includes instances of negligence, inadvertence, or a genuine misunderstanding of tax requirements.

Willful Violations and VDP - The IRS Voluntary Disclosure Practice (VDP) is intended for taxpayers who have willfully or intentionally violated tax laws. It is an alternative to the IRS Streamlined Procedures and requires careful consideration based on the taxpayer's situation.

Given the complexity of IRS Disclosure Programs and the considerations outlined, it is advisable for taxpayers to consult with an experienced Virginia IRS disclosure tax attorney to evaluate their options and choose the most suitable program.

In 2024, can Businesses Use the IRS Voluntary Disclosure Program?

Business entities with undeclared offshore accounts or foreign financial assets can voluntarily disclose their foreign assets to the IRS. They can choose between using the 2024 IRS Streamlined Filing Compliance Procedures or the 2024 IRS Voluntary Disclosure Procedures. Businesses must meet the same criteria as individuals when filing a voluntary disclosure, including fulfilling foreign account disclosure obligations and must be in tax compliance. However, failure to comply with the IRS disclosure process or filing requirements may trigger an IRS audit or criminal investigation.

What IRS Documents Should Businesses Be Filing as Part of an IRS Voluntary Disclosure?

In order to properly take advantage of  the 2024 IRS's Streamlined Filing Compliance Procedures, or IRS VDP, or for a 2024 IRS voluntary offshore disclosure, a corporation must file particular forms that are determined by (i) the type of business and (ii) the foreign financial asset or assets that are required to be disclosed. A business may be required to file the following paperwork depending on the situation:

• IRS Form 1040X (for sole proprietorships and pass-through entities)
• IRS Form 1120-X (for corporate entities)
• IRS Forms 3520, 3520-A, 5471, 5472, 8938, 926, and/or 8621 (for varying types of foreign financial assets)
• IRS Form 14654

What is an IRS Form 906 Closing Agreement in the 2024 IRS Voluntary Disclosure Program (VDP)?

“A closing agreement is a binding agreement between the IRS and a taxpayer that, if properly executed, finally, and conclusively settles a tax issue between the IRS and a taxpayer.” IRS Form 906 is used, as explained by the IRS, to settle some issues that are unrelated to a taxpayer's overall income tax burden, such as fulfilling taxpayers' requirements for offshore disclosure compliance. The IRS also clarifies that agency discretion governs the decision to enter into a Form 906 disclosure agreement. Stated differently, the filing of an IRS voluntary disclosure does not guarantee the signing of a closing agreement by the IRS. Making mistakes along the road can result in a serious IRS tax audit or even an IRS criminal investigation. Hiring an experienced Virginia tax compliance attorney to manage your IRS voluntary disclosure will boost your chances of achieving a closing agreement.

Can Your IRS Voluntary Disclosure Become Criminal?

When voluntarily disclosing information to the IRS, taxpayers risk criminal prosecution, if the IRS finds evidence of the taxpayer purposefully withholding information on their offshore accounts or other foreign financial holdings. Therefore, if a taxpayer decides to disclosure their foreign financial assets, it is best to disclosure them all at one time and not leave any of them out of the IRS foreign asset disclosure.

Only U.S. taxpayers whose conduct is not willful qualify for the 2024 IRS's Streamlined Filing Compliance Procedures, certifying each violation was inadvertent. Despite this certification, the IRS will review the information provided to them by the taxpayer to determine eligibility for expedited filing.

Information provided in an IRS streamlined filing can be used by the IRS, potentially triggering a criminal investigation for deliberate violations. This same rule also applies to applications for disclosure under the IRS Criminal Investigation's 2024 Voluntary Disclosure Program.

What Makes an IRS Voluntary Disclosure Become a Criminal Case?

Purposeful willfulness is the primary cause of an IRS voluntary disclosure under the IRS's Streamlined Filing Compliance Procedures turning into an IRS criminal investigation and/or prosecution. The protection offered by the IRS Streamlined Procedures is limited to inadvertent infractions. Your streamlined filing may be denied, and you may be charged with federal tax fraud if the revenue agent reviewing it finds that your declaration of non-willfulness is false.

2024 IRS Voluntary Disclosure Practice (VDP) cases with the IRS are not the same. A Virginia or US taxpayer must be concerned about the circumstances of their actions or be looking to correct a deliberate breach of tax law to file under the VDP. However, as the IRS Criminal Investigation Division makes it clear, filing a a disclosure through the VDP does not provide immunity from a criminal investigation or a prosecution.

If the IRS Contacts you Prior to Making a Voluntary Disclosure, What Should You Do?

Put simply, the taxpayer should contact an experienced and skilled Virginia tax defense attorney right away if they receive a visit, letter, or call from the IRS before making an IRS voluntary disclosure. Also, the taxpayer is no longer qualified to file a voluntary disclosure with the IRS under the 20254 Streamlined Procedures or the IRS VDP, and they run the risk of facing all applicable civil and criminal penalties under FATCA, the BSA, and other applicable federal statutes. To be clear, if contacted by the government the taxpayer should not speak with the government until they obtain legal advice from counsel.

According to the 2024 IRS Voluntary Disclosure Program, What Qualifies as Tax Fraud?

Any violation of the Bank Secrecy Act or FATCA regulations by a taxpayer pertaining to the disclosure of international bank accounts may result in prosecution for federal tax fraud. A common misconception is that penalties only apply to those who underpay their IRS debt. That is not always the case, though, and taxpayers can seldom talk their way out of failing to make disclosures of foreign assets when written documents and government forms are involved. Charges of tax fraud may result from reporting infractions, even if there is no evidence of underpayment of federal tax obligations. IRS investigations into tax fraud are more frequent when taxpayers fail to declare offshore accounts and other foreign financial assets.

Are There IRS Audits in the 2024 Offshore Voluntary Disclosure Program (OVDP)?

When you file a voluntary disclosure through the 2024 IRS Voluntary Disclosure Practice (VDP) or the 2024 Streamlined Filing Compliance Procedures, IRS Criminal Investigation agents will examine your information to determine the severity of your prior offshore disclosure violations and whether any type of enforcement action is required. This type of review could result in an IRS tax audit or even an IRS criminal tax fraud probe, depending review of the information and based on the agents' decision.

The choice of whether, how, and when to voluntarily disclose an offshore financial asset is one that must be made with great care, attention, and caution. Is it in the taxpayers’ best interests to make a voluntary disclosure? Will an IRS audit or probe be prompted by the taxpayer's voluntary disclosure? Should that be the case, what further choices do taxpayers have? An IRS Offshore Voluntary Disclosure tax attorney with experience can assist a taxpayer in answering all these important inquiries.

What is an FBAR?

I touched on FBARs (Foreign Bank Account Reporting Forms) above, but it is worth clarifying their role in this discussion. In many cases, U.S. taxpayers who own foreign financial accounts will have two separate filing requirements: (i) the obligation to file IRS Form 8938 under FATCA, and (ii) the obligation to file an FBAR under the BSA.

Why are the same details covered by two requirements? FBARs are lodged with FinCEN; IRS Form 8938 is sent to a separate agency. Second, the government views the requirements for FATCA and FBAR filings as having two distinct functions. Third, not everyone who is required to submit an FBAR will also need to file IRS Form 8938, despite the many similarities between the FATCA and FBAR filing requirements. Therefore, in addition to complying with the FBAR filing requirements, U.S. taxpayers who own international accounts now need to make sure they comply with FATCA and file an additional Form 8938.

How Does an FBAR and an IRS Voluntary Disclosure Relate?

A U.S. taxpayer who is required to make a voluntary disclosure to the IRS will frequently also be required to file an FBAR (or several FBARs) with FinCEN. In addition to submitting their 2024 streamlined filings to the IRS disclosure, taxpayers who are late on their FBAR filing duties must also complete all necessary filings with FinCEN to be in tax compliance.

Are you Required to Report a Cryptocurrency Account on an FBAR or in an IRS Offshore Voluntary Disclosure?

Under current regulations, cryptocurrency accounts do not require disclosure under the Bank Secrecy Act. This means that if U.S. taxpayers exclusively hold cryptocurrencies, they are not obligated to file FBARs to report these accounts in some circumstances. However, if a foreign financial account includes cryptocurrencies along with other assets, an FBAR filing may be necessary in some situations. Investors holding cryptocurrencies may find it necessary to disclose their offshore holdings to the IRS due to FATCA's broad application of various foreign financial assets beyond just accounts. Regulatory changes in this area are frequent and ongoing. Therefore, taxpayers who fail to report accounts containing mixed foreign financial assets should carefully consider whether an IRS

voluntary disclosure is the appropriate action, or if an alternative approach would be more suitable given the circumstances. As a result of the complexity of the law and the constant changes, it is strongly recommended that taxpayers seeking an IRS Voluntary Disclosure consult with an experienced Virginia IRS tax attorney.

How will the IRS Voluntary Disclosure Program (OVDP) Move Forward?

The 2024 IRS's Streamlined Filing Compliance Procedures and 2024 IRS Criminal Investigation's Voluntary Disclosure Practice have replaced the OVDP for U.S. taxpayers with offshore financial accounts. Compliance with FATCA and the Bank Secrecy Act remains crucial, with increased scrutiny expected, especially regarding cryptocurrency accounts. Taxpayers should seek guidance from experienced former IRS tax attorneys like Kevin E. Thorn and his Team from the Thorn Law Group to navigate such complex compliance tax issues. The IRS disclosure process is constantly evolving on a yearly basis and should not be taken lightly.

Furthermore, Mr. Thorn has developed deep connections with the leadership of all the major government entities in Virginia and in Washington DC involved in the various IRS voluntary disclosure programs. The list of the organizations he works with frequently include but are not limited to the Virginia taxing authorities and federal courts in Virginia, the Internal Revenue Service, the U.S. Department of Justice, FinCen, and the U.S. Tax Court. He and his Team have saved his clients billions of dollars in taxes, penalties, interest, and they have protected their clients from severe government investigations.

Contact Kevin E. Thorn, and his office, regarding IRS Tax Audits, 2024 IRS Voluntary Disclosure Programs, or Offshore Voluntary Disclosures today at 703-783-2357. 1934 Old Gallows Road, Suite 350 Tysons Corner, VA 22182