Three Cases and Options for Tax Penalty Minimization

When trying to determine the proper path to offshore compliance, there are a number of things to consider. Currently, the IRS has designated the following options:

  1. Offshore Voluntary Disclosure Program
  2. Streamline Domestic
  3. Streamline Foreign
  4. Delinquent FBAR Submission Procedure
  5. Delinquent Informational Submission Procedure

This article is focused on how a penalty mitigation analysis can help determine the best path to compliance. We will be reviewing three different client situations.

Client 1

Our hypothetical Client 1 has a Highest Aggregate Balance (HAB) of $900,000 and a Highest Year-End Balance (HYB) of $850,000 and a total unreported income of $119,000 in eight reporting years.

Client 2

Our hypothetical Client 2 has a Highest Aggregate Balance (HAB) of $475,000 and a Highest Year-End Balance (HYB) of $415,000 and a total unreported income of $40,000 in eight reporting years.

Client 3

Our hypothetical Client 2 has a Highest Aggregate Balance (HAB) of $48,000 and a Highest Year-End Balance (HYB) of $46,000 and a total unreported income of $4,000 in eight reporting years.

The full article download conducts a penalty mitigation analysis that walks us through each of these three clients in both willful and non-willful situations to find the best path with the lowest tax and penalty amount. It also considers an IRS audit.

We analyze the following scenarios and options:

Client 1 – Non-Willful

  • Scenario A – 2014 OVDP
  • Scenario B – Opt-Out of OVDP

Client 2 – Non-Willful

  • Scenario A – Streamline Domestic

Client 3 – Non-Willful

  • Scenario A – Quiet Disclosure & Audit by IRS
  • Scenario B – Streamline Domestic – Unreported
  • Scenario C – Streamline Domestic – Reported
  • Scenario D – Delinquent FBAR Submission Procedures

Five Stone Tax Advisers conducts a penalty mitigation analysis during the initial consultation, prior to the submission of any Streamline filing and during the certification process with Offshore Voluntary Disclosures. As you will clearly see from these three sample cases, there are significant savings that can be achieved if the path is chosen that is in the client’s best interest.

About Five Stone Tax Advisers

Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of offshore account cases.

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Five Stone Tax
by Five Stone Tax

Five Stone Tax is America’s trusted tax adviser, offering full-service tax solutions with the goal of making sure all of our clients pay the lowest amount of taxes legally possible. As the most effective tax representation company in America, our team consists of the best Tax Attorneys, Enrolled Agents, case managers, and administrators in the industry.

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