The Offshore Voluntary Disclosure Program (OVDP) is a program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets.
In practice, OVDP is an IRS tax amnesty program. It provides taxpayers with:
- Protection from criminal liability
- Terms for resolving their civil tax and penalty obligations
At Daniel Rosefelt & Associates, LLC, Attorney & CPA, we advise clients living in the U.S. and abroad about use of OVDP, to help them avoid civil and criminal liability.
Problem-Solving Tax Lawyers
IRS enforcement actions and legislation, such as the Foreign Account Tax Compliance Act (FATCA), mean that taxpayers with foreign bank accounts face increased scrutiny.
To avoid possible criminal prosecution and significant civil liabilities, the services of an experienced team of tax professionals is essential. Daniel Rosefelt & Associates, LLC, Attorney & CPA have significant experience in resolving international tax problems, including the use of OVDP, tax installment programs and Offers in Compromise.
Call us at 301.656.4424 to learn more about OVDP, and whether it is appropriate given your circumstances.
Offshore Income & Filing Information For Taxpayers With Offshore Accounts
U.S. citizens, resident aliens and certain nonresident aliens are required to report worldwide income from all sources, including foreign accounts, and pay taxes on income from those accounts at their individual rates. There are many legitimate reasons for holding offshore accounts, including convenience, investing and to facilitate international transactions. By law, U.S. taxpayers are not permitted to use offshore accounts, such as foreign bank and securities accounts as well as trusts, to avoid paying taxes.
In most cases, affected taxpayers need to fill out and attach Schedule B to their tax returns. Part III of Schedule B asks about the existence of foreign accounts and usually requires U.S. citizens to report the country in which each account is located. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Specified Foreign Financial Assets, if the aggregate value of those assets exceeds certain thresholds that vary depending on filing status and whether the taxpayer lives abroad. Additional filing requirements apply to those with foreign trusts.
Separately, taxpayers with foreign accounts whose aggregate value exceeds $10,000 any time during the year must file a Form 114, Report of Foreign Bank and Financial Accounts (FBAR) electronically through FinCEN’s BSA E-Filing System. For many years, the FBAR was not filed at the time your federal tax return was filed. Instead, it was filed by June 30 each year. Beginning in April of 2016, the FBAR or FinCEN Form 114 must now be filed by the same time as the filing of your tax return (including extensions).
Penalties For Noncompliance
Failure to report the existence of offshore accounts or pay taxes on these accounts can lead to civil and criminal penalties. For the Form 8938, the penalty may be up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply. For the FBAR, the penalty may be up to $10,000, if the failure to file is non willful; if willful, however, the penalty is up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply. Taxpayers with undisclosed accounts should consider options available under the expanded Streamlined Compliance Filing Procedure or the Offshore Voluntary Disclosure program.
Options Available For U.S. Taxpayers With Undisclosed Foreign Financial Assets
The implementation of FATCA, and the ongoing efforts of the IRS and the Department of Justice to ensure compliance by those with U.S. tax obligations, have raised awareness of U.S. tax and information reporting obligations with respect to non-U.S. investments. Because the circumstances of taxpayers with non-U.S. investments vary widely, the IRS offers the following options for addressing previous failures to comply with U.S. tax and information return obligations with respect to those investments:
- Offshore Voluntary Disclosure Program
- Streamlined Filing Compliance Procedures
- Delinquent FBAR submission procedures
- Delinquent international information return submission procedures
To learn more about the FBAR voluntary disclosure program and how we can help you, contact Daniel Rosefelt & Associates, LLC, Attorney & CPA by calling 301.656.4424. We serve clients around the world from our offices in Bethesda, Maryland.