From the Tax Law Offices of David W. Klasing - Can You Be Prosecuted if You Withheld Information in Your Offshore Voluntary Disclosure?

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Tax Law Offices of David W. Klasing, PC

Jun 10, 2021, 06:37 ET

IRVINE, Calif., June 10, 2021 /PRNewswire/ -- American taxpayers are required to report their income from any source, including foreign financial accounts and offshore income generating assets held overseas. A willful failure to report taxable income or supply required foreign information reporting related to any financial accounts or income generating assets held offshore may result in civil & criminal penalties. Depending on your unique situation, you may be facing tax fraud charges, fines, and possibly even jail time. However, the IRS provides taxpayers with a way to pay get back into compliance while simultaneously giving them a chance to avoid criminal penalties even where their offshore income and information reporting failures were willfully fraudulent. Through the Offshore Voluntary Disclosure Program (OVDP), taxpayers can correct their offshore tax issues and secure a pass on criminal tax prosecution if the terms of the program are strictly complied with.

The OVDP relies on the cooperation of the taxpayer with the IRS and requires truthful and honest communication. Providing false information on your OVDP or withholding important details undermines the entire process. A less than truthful OVDP could make you vulnerable to criminal prosecution. Its important to note that ALL OVDP's will be audited and lying to a federal agent is a felony in and of itself.

If you hold offshore assets or accounts and failed to report them on your taxes at any time, you may be eligible to enter the OVDP. Doing so may be the best way to make good on your tax liability and avoid criminal consequences. Our California tax lawyers and CPAs can help you through this process and make sure that you disclose all that is required to qualify for the program. Call the Tax Law Offices of David W. Klasing at (800) 681-1295 for a consultation with our experienced tax team or schedule online here to receive a reduced rate initial consultation.

Consequences for Withholding Information in Your OVDP

One of the major benefits of the OVDP is that taxpayers have the opportunity to be protected from criminal offshore tax evasion and foreign information reporting prosecution. The OVDP allows taxpayers who have intentionally failed to file or failed to include important offshore information reporting on their taxes to cooperate with the IRS to resolve the issue without facing criminal tax prosecution. In return, the IRS will forego opening a criminal investigation and pursuing criminal prosecution even where a taxpayer's actions were obviously fraudulent. However, the key to the OVDP is that all communications from the taxpayer must be truthful and honest. Any false or misleading information provided by the taxpayer during the process of attempting to get clean may lead to termination from the program followed by criminal prosecution.

Once terminated from the program, the taxpayer will be subject to criminal prosecution because they are no longer protected under the OVDP. Under § 9.5.11.9.4 of the Internal Revenue Manual are disqualifying factors that would result in someone's termination from the OVDP. One such factor is providing false information or withholding important information in your OVDP paperwork. Giving false statements or withholding information makes a person ineligible and they will be removed from the program.

Our dually licensed California Tax Fraud Defense Lawyers and CPAs can help you complete your OVDP paperwork and avoid making any unintentional false statements. We will also help you make sure all necessary information is provided.

Recent Court Ruling About Withholding Information in Your OVDP

As recently as 2020, courts have ruled on cases involving taxpayers who withheld information in their OVDP paperwork. Withholding such information is incredibly serious because the point of the OVDP is to avoid criminal penalties for tax fraud and related offenses. By intentionally withholding relevant information, the taxpayer is layering fraud on top of fraud.

The United States District Court of the Central District of California ruled in United States v. Agrama that a taxpayer who had been terminated from the OVDP for withholding information was subject to a summons issued by the IRS in relation to an open criminal tax investigation.

The Agramas reported in the OVDP paperwork that they were not under any criminal investigation when they entered the OVDP. This is important because any taxpayer under any kind of criminal investigation or under audit would be ineligible for the OVDP. However, the Agramas were, in fact, under criminal investigation by Italian tax authorities. They were convicted of tax evasion in Italy in 2012 and removed from the OVDP in 2013.

After termination from the OVDP, the Agramas were subjected to a tax audit for the years 1997 to 2011, a 14-year span. In relation to this investigation and audit, the IRS issued a summons against Agramas and they had to hand over all documents relating to the Italian criminal trials. The court upheld the enforcement of the summons.

In the case of the Agramas, and any other taxpayer found to be withholding information in their OVDP paperwork, criminal prosecution, and other legal penalties a very real possibility. Our dually licensed California Tax Fraud Defense Attorneys and CPAs can help if you have been terminated from the OVDP or better yet, help prevent your termination in the first place. At times, offshore compliance issues have been up to 80% of our book of business.

How Much Information Does the OVDP Require?

Filling out paperwork and forms for the OVDP requires very important and extensive information. Although the preliminary forms alone call for a lot of important details, the second part of the OVDP process requires the taxpayer and possibly their spouse to write a narrative explaining the complete story of their non-compliance. This narrative is not a short story but rather a lengthy explanation in great detail about your non-compliance or tax-related offense and specific facts are required in this narrative.

The taxpayer must include information about their personal and professional history and they must identify any professional advisors involved in their non-compliance. Taxpayers must also include all facts, favorable and unfavorable, that give a clear and complete story about the non-compliance from the date of inception up to the present. Depending on how long ago your non-compliance occurred, this could be a very lengthy story.

With so much information being provided, it can be easy to provide false or misleading information. It may even be tempting to leave out unfavorable details that cast you in a negative light. Keep in mind that taxpayers submit these narratives under the penalty of perjury. Under § 7206 of the Internal Revenue Code, someone who willfully makes false statements under penalty of perjury may be guilty of a felony, fined up to $100,000, and incarcerated for up to 3 years. Call our California tax fraud defense lawyers and CPAs for assistance in writing your narrative and making sure all information is included.

If you were terminated from the OVDP, there is a chance you could be criminally prosecuted. Not only are you vulnerable to prosecution for your tax offenses, but you may face penalties for lying in your OVDP paperwork. For the best possible outcome in your OVDP, call the Tax Law Offices of David W. Klasing at (800) 681-1295 or schedule online here to receive a reduced rate initial consultation.

Public Contact: Dave Klasing Esq. M.S.-Tax CPA, [email protected]

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