What Are The Requirements Of The Offshore Voluntary Disclosure Program?

Under the traditional Offshore Voluntary Disclosure Program (OVDP), you would need to amend your tax returns for the last eight years and file your foreign bank accounts reporting(FBAR) for the last six years. Under the new streamline program, if you are a non-willful actor, you would only need to amend the last three years of tax returns and submit six years of FBAR filings.

What If I Have Unreported Income From A Domestic Source Or Some Other Undisclosed Income Tax Liability That Is Not Related To Foreign Financial Account?

The IRS also has a domestic voluntary disclosure program. The program depends on the facts and circumstances of the individual case. The procedure is somewhat the same as the traditional offshore voluntary disclosure program, meaning you first need to contact the IRS criminal investigation division to apply for a disclosure. Once approved, you will need to amend your tax returns for the last six years and submit them for processing.

What If The Government Is Investigating The Foreign Financial Institution Where I Hold My Account Or Another Facilitator Who Assisted In Establishing Or Maintaining My Offshore Arrangement?

If the government is investigating the institution, then you should attempt to make a voluntary disclosure as soon as possible. The government has already entered into various intergovernmental agreements with other countries, which requires the banks of these countries to provide information on any U.S. account holders. If you have a foreign account and it is not disclosed, it is in your best interest to make the disclosure as soon as possible.

How Does The Offshore Penalty Framework Work? Can You Provide An Example?

Under the new streamline filing procedures, there is different penalty structure depending on which program you qualify for. If you qualify for the streamline filing compliance procedures as a non-willful actor, then the penalty you will face is five percent of the highest account balance during the time period in question. Under the original OVDP, it is 27.5% of the highest account balance. If you are a willful actor under the Streamline Filing Compliance procedures, the penalty will be 50%. For example, say I have an account in Canada for a five year period and the account’s value fluctuates between $10,000 and $1,000,000. Under the Streamline Filing procedures, I would need to pay tax on any unreported income for three years of amended tax returns, plus a five percent penalty on the highest balance. The five percent penalty would be $50,000. Under the OVDP, I would need to pay tax on eight years of unreported income and a $550,000 penalty. Under the Streamline Filing procedure as a willful actor, I would pay tax on three years of unreported income and a $1,000,000 penalty.

What Years Are All Included In The Offshore Voluntary Disclosure Program Period?

As discussed, the streamline filing compliance procedures require three years of amended tax returns and six years of FBAR reporting. The traditional OVDP requires eight years of amended tax returns and six years of FBAR reporting.

What Is The Deadline For Making A Submission To The 2014 Offshore Voluntary Disclosure Program?

At the moment, there is no deadline, since that program is still open. However, to qualify as a non-willful actor, you need to show that you made the disclosure as soon as you became aware of the requirements to do so. Therefore, it is imperative to act as soon as possible to remedy the issue.

Additional Information On The Offshore Voluntary Disclosure Program

The 2014 voluntary disclosure program is still available and not closing yet. That includes the Streamline Filing Compliance procedures. If you are a non-willful actor, you still have the opportunity to disclose your foreign account and only pay a five percent penalty, rather than the astronomical penalties you would pay without a disclosure.

For more information on Requirements Of Offshore Voluntary Disclosure Program, a free initial consultation is your best step. Get the information and legal answers you are seeking by calling (714) 321-3369 today.

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