Voluntary Disclosure for Intentionally Underreported Taxable Income
While the majority of US taxpayers who have undisclosed income are non-willful, there are some taxpayers who do intentionally underreport their taxable income — and therefore they fall into the willfulness category. One important aspect about being willful is that it does not automatically mean that a person acted ‘Criminal’ — and it does not mean they are excluded from making a voluntary disclosure. In fact, for taxpayers who have acted willfully regarding the non-disclosure of domestic or foreign taxable income – voluntary disclosure program is designed to assist taxpayers with safely getting into compliance. Unfortunately, some taxpayers get thrown into the program by unscrupulous tax attorneys who made purport to be an expert, but are not and they end up in a worse situation than they should be in. Let’s go through three (3) important reasons why a taxpayer may want to consider using voluntary disclosure for any intentionally underreported taxable income:
Avoid Criminal Prosecution
One main benefit to entering the voluntary disclosure program is that in almost all cases in which a Taxpayer makes full disclosure and is truthful in their disclosure, they will avoid criminal investigation and prosecution. When it comes to civil tax violations that are fraudulent, there is no statute of limitations — and oftentimes these types of investigations can lead to criminal investigations as well. But, by submitting to the voluntary disclosure program—even for intentionally underreported taxable income — a taxpayer can usually avoid criminal prosecution.
Limitation of IRS Penalties
When a person has not entered into voluntary disclosure and the US government discovers that they have unreported taxable income and possibly reportable foreign accounts and assets, it may lead to fines and penalties. There is a broad range of penalties a taxpayer may be subject to if they have underreported taxable income, accounts and assets. By entering to the program, taxpayer can have a better idea of the specific amount of penalty that they will be subject to — as well as receiving a closing letter at the end of the process so that they know that the IRS will not pursue an additional investigation on the same issues.
Regain Peace of Mind
As time passes after a person has intentionally underreported their taxable income, sometimes their nerves can get the best of them. It becomes difficult to sleep and operate on a day-to-day basis knowing that they are unsure whether or not the IRS knows of the Taxpayer’s unreported income — and whether or not they have already initiated an investigation. By entering into the voluntary disclosure program, a person can regain their peace-of-mind.
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Golding & Golding specializes exclusively in international tax and specifically IRS offshore disclosure.
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