Tag Archives: OVDP

Statute of limitations on an IRS tax audit demonstrates U.S. dislike of all things #Offshore

The above tweet references an excellent summary of the various IRS statutes of limitation by Robert Wood of the various statute of limitations.

In true U.S. tax style:

1. The U.S. is very suspicious of anything that is foreign; and

2. They will have a longer time to audit it.

The article includes:

With foreign accounts, six years is typical, and in some cases, the IRS has no limit. An FBAR (also called FinCEN Form 114), is a disclosure form for reporting foreign accounts. FBARs have a separate audit period, generally six years. For unfiled tax returns, criminal violations or fraud, the limits can be longer. In most cases, the practical limit is six years, but for some information returns the IRS can audit forever.

You might think that if you fix your tax returns or FBARs, you would reduce your audit time. However, the answer varies with IRS disclosure options. The main IRS program for offshore accounts is the OVDP, and in that program, once your closing agreement is signed, you are truly done, with no audits thereafter. But with the IRS Streamlined programs, there is no closing agreement.

(Please note that I added the hyperlinks in the above quote. Mr. Wood’s original post did NOT include these links.)

In an earlier post I referenced Mr. Wood’s article on America’s deadliest form – the “5471”. This is the information return for a “Controlled Foreign Corporation” (non-U.S. corporation). A failure to file the “5471” (which is a separate tax return) means that the statute of limitations never starts running. In general, U.S. citizens abroad should avoid carrying on business through a non-U.S. corporation – including the Canadian Controlled Private Corporation.

 

Related articles

The horrors of retirement planning for #Americansabroad – #PFIC edition

 

General discussion of how the PFIC rules work in theory:

Discussion of the incredible unfairness and stupidity of the PFIC rules in practice (don’t enter OVDP):

And a comment that says it all:

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Taxpayer Advocate Service (TAS) – The Decline And Fall of A Once Great Department Inside The IRS

The lesson learned here is that now more than ever YOU need to be educated about YOUR tax obligations and if (more likely when) YOU get scrutinized YOU will have to learn to navigate the disturbingly troubled operational patterns of the IRS’ Examination (audit), Appeal, and/or Collection functions either on YOUR OWN or with the trusted advice of a friend or relative that may have had similar experiences.

Formulating the problem – Thoughts on the compliance dilemma for #Americansabroad – What you need to consider before contacting a lawyer

decision

The Reality of U.S. Citizenship Abroad

Nobody denied that the unintended targets of Congressional legislation aimed at those who supposedly “owe allegiance” to the USA, now assisted by craven foreign governments anxious lest their financial services entities lose access to the US market, are mostly unlikely to do anything at all. But the whole idea of universal self-assessment of taxation is to keep the taxpayer in an anxious condition, to make him overpay if possible, but at least not to underpay. Those now faced with an unprecedented, even retroactive, enforcement campaign and who must, if they wish to become compliant and avoid penalty or even prosecution (should they be identified in the future), sacrifice much of their wealth, even become insolvent.

Comment at the Isaac Brock Society blog – July 29, 2013

http://isaacbrocksociety.ca/2013/07/29/traumatized-by-the-irs-reaching-into-the-world-london-july-28-2-5-pm/comment-page-1/#comment-455276

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