Offshore Voluntary Disclosure Program Is Going Away Soon: What You Should Know

admin April 26, 2018 Comments Off on Offshore Voluntary Disclosure Program Is Going Away Soon: What You Should Know
Offshore Voluntary Disclosure Program Is Going Away Soon: What You Should Know

If you have any assets in offshore accounts, you currently have the opportunity to disclose that information to the IRS without fear of criminal prosecution for avoiding paying taxes on those assets in the past. This program, called OVDP or Offshore Voluntary Disclosure Program is run by the IRS and is available to all American citi b +

zens.

However, it may soon become unavailable to everyone. In fact, the IRS have announced that the program will be terminated later this year. That means that you won’t be given any amnesty if your offshore accounts are discovered or if you decide to come clean.

So, the window of opportunity to come clean to the IRS is closing, and you only have until the end of September to apply for this program. Attorneys who specialize in tax law, like https://brunorolaw.com/ are the best source of information and help if you decide to apply to the program. The information was announced quite recently, too, in mid-March, which means that taxpayers have been given a relatively short notice on this major change of policy.

OVDP History

The disclosure program was first introduced in 2012 in order to facilitate and promote the legalization of foreign income of the US citizens. It was later modified in 2014, and that program still exists today. However, it was not the first disclosure program implemented by the IRS. Both in 2009 and in 2011, there have been attempts to persuade people with undisclosed offshore assets to come forward and legalize those assets.

The current version of the disclosure program is in essence no different than any of the previous versions, but there have been some changes in the 2014 update. Some of these changes may affect you negatively if you haven’t started your disclosure program yet.

Major Changes to the OVDP

Previous versions of the OVDP seem to have been slightly more lenient towards people with hidden offshore accounts, and that trend is followed by the recent announcement of the termination of the program. Here is the most impactful change which the majority of people point to.

You may get penalized at 50% if the offshore institution is under an investigation by the federal government or is forced to cooperate with the federal government in a financial investigation. The same rule applies if the person who helped you set up and/or run your offshore account is in the same situation. At that point, it is considered that you aren’t cooperating in order to come clean and return all of your money into the legal streams, but rather that you are afraid of criminal prosecution and that you are cutting your losses.

What If I Decide Not To Apply

Most people with offshore accounts have one reason or another for stashing the money away from the IRS. Avoiding paying the tax on that money is just one of the possible reasons. However, if the IRS discovers that you have some assets in offshore accounts that you did not report, you may face some serious civil penalties as a result.

What’s more, you may even be accountable for some criminal penalties as well, which can be far more problematic. Over the years, the attention of the IRS has turned more and more towards the offshore accounts, so the detection is becoming more likely.

Potential Civil Charges

The civil penalties levied against the taxpayers who fail to disclose their offshore activities are largely monetary in nature. However, the severity of said fines varies drastically from case to case and from transgression to transgression.

For instance, a deliberate omission of filing an FBAR (report of foreign bank and financial accounts) can be fined as high as $100,000 or up to 50% of the value of the money discovered in the account which was not disclosed. However, if the IRS concludes that the omission was involuntary or accidental, the fine is reduced to $10,000.

This is one of the most common and the highest fine related to undisclosed offshore accounts. There are a score of smaller transgressions which can bear a fine of around $10,000, which you can find on the website of the IRS as well.

Potential Criminal Charges

Monetary fines are just a slap on the wrist compared to the possible criminal charges which you may face if you are discovered by the IRS without previously applying for the disclosure program. YOU may face several different charges, including tax evasion, failing to file an income tax return and filing a false tax return.

Tax evasion can land you in prison for up to 5 years, in addition to a hefty $250,000 fine, whereas false returns warrant a 3 year prison sentence and the same fine of $250,000. Finally, failing to file an FBAR can potentially see you behind bars for up to 10 years and paying a massive fine of $500,000.

The US government takes tax fraud seriously and is willing to be lenient towards its prodigal children for a limited period of time. Seize this opportunity, and sort your foreign accounts while the amnesty lasts, because the penalties are serious and potentially life-changing. Find a good tax attorney to help you prepare all the paperwork before the OVDP expires in September.

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