Safer for the taxpayer in most cases, penalties and further audit, potential criminal prosecution are far worse outside the program for many people unless:
a) you have merely not filed FBARs but have reported the income from the account
b) you really are a minnow, i.e. you owe littles to no taxes anyway. By little, we are talking only a couple of thousand $'s
The IRS are already extensively following up on those who submitted silent submissions of amended TRs or originals, disclosing large increases income and balances due.
The issue is, they have not been honest and law obiding though have they? Personally, I find it bizarre how any American can not know they have to file taxes wherever they are. But I do recognise there are some accidental Americans who do not realise this. I have had several clients who fall into this category, i..e. parents were working in the US and they happened to be born there and left before they were one but continue to renew their passport. Other than the fact is says in the passport, I think they can be expected to be somewhat ignorant of their obligations. There should be concessions for these people. But I dont sympathise with Joe Bloggs who took that great career opportunity and said, "oh they'll never know, I have no intention of going back, Switzerland wont tell". well, whoopsie.
This may sound like I am pro American tax law, I really am not, but the reality of the situation is exactly as I have said. Of course, as tax professionals we will fight tooth and nail where an argument can be made, and we will push home the poor me sob story to minimise all risk, but of course we also know when you are telling us a load of bull and you knew full well what you were supposed to be doing. You see, when you are dealing with someones personal finances, life choices and facts, and you deal enough with this stuff, it becomes transparent a lot of the time. Everyone has a story and an excuse, some are justified, but if you make the decision to become compliant, then its going to be no bed of roses either way for most.
Whether it is wilful or not depends on his circumstances. He will need to assess that. There is not in the slightest bit enough information to make the determination here. All I can say is it is a hard argument to make a lot of the time. Particularly with non filing of returns. FBARs and/or under reporting are easier to make non-wilful arguments.
I agree he should be wise before throwing his money around, as well as doing his research which is why I provided him the FAQs to determine his viability to the recent program, but he did indicate he is somewhat tied in somehow. I have to say though, whilst those website are interesting and bring about some supposed real life examples, I do have to question the first blog I saw when I clicked on it last night. It spoke about a guy who has always been compliant with returns, reported all income, just never filed FBARs, and he got stung bad in compliancy fees, as well as penalties double his compliancy fees. Well this is just ludicrous, the IRS freely admit no penalty application for failure to file FBARs if all income has been reported from accounts and no need to go through OVDI. If he was led astray by rogue accountants, well thats a different matter all together. Plus, he still has the chance to challenge it in all likelihood and claim it back. So I do think some of the stories there are waffle.
As I mentioned in a prior post, I do agree with the US based comment. It is a common problem.
I do not agree with the last sentence. It is not a question of liking the laws, it is a question of understanding them and assisting those who wish to become complaint in doing so in the best way possible. What I would do if it were me in the situation may vastly differentiate from what I inform people of the risk and options, but I can only make people aware.
Some people choose to become compliant because they have to, they see no other way. What they need is someone who can assist them to do that in the correct manner.
It can be expensive, bother the compliance and the liabilities, but that is because it involves a great deal of work. Its much cheaper if you just remain compliant each year. I do know why many people almost feel people like me are getting some sort of kickback or commission from the IRS for these matters. Plus, when it gets very real for people, and the IRS are demanding $1million, and we cut that down to $250,000, they appreciate the work we do.