What do US taxpayers in San Diego need to know about the IRS Offshore Voluntary Disclosure Program or OVDP and how can it be the safest option for disclosing previously unreported offshore accounts, assets and income? The IRS Offshore Voluntary Disclosure Program is exactly what it sounds like – a voluntary disclosure by the San Diego or US taxpayer of previously unreported offshore bank or investment accounts, assets, real estate, corporate ownership interests or income located or generated outside of the United States. These accounts and assets must be listed on the Report of Foreign Bank and Financial Accounts or FBAR which is due electronically June 30 to the IRS. There is no extension available for FBAR submission.
If a taxpayer has omitted offshore income, assets or accounts from previous year’s reporting, the IRS can levy a penalty of 50% of the highest accumulated balance of these assets and accounts at any point in time for each year and incidence, or $100,000 per incidence (whichever is higher). Offshore banks and financial institutions in more than 100 countries worldwide are directly reporting the accounts of US taxpayers and resident foreign nationals to the IRS. If you live or work in the US and have a foreign bank account or own property (even if your family has held that asset for generations) it must be reported to the IRS on an FBAR.
For those who have inadvertently or in some cases, willfully, failed to report every account and associated income to the IRS, there are two programs that provide the opportunity to disclose past mistakes and come into compliance with IRS FBAR reporting: the Offshore Voluntary Disclosure Program or OVDP, and the Streamlined Domestic (or Foreign) Offshore Procedures. The Offshore Voluntary Disclosure Program is the only option that provides assurance of release from criminal prosecution for tax evasion, and a fixed penalty that allows a taxpayer to specifically and safely know the extent of their exposure and come into compliance in one step. Those who submit a streamlined application must complete an exhaustive background questionnaire for the IRS that discloses all education, financial experience, training, travel, offshore investment strategy, how and why accounts were established, the source of funds used and many other details under penalty of perjury. If the IRS refuses the streamlined application it is highly possible that the taxpayer will face the full fury of the IRS including the above draconian penalties as well as exposure to criminal tax prosecution and the real possibility of time in prison.
These are complex matters, and require expert advise from our seasoned international tax attorney, Janathan Allen. We invite you to contact us for a free consultation at 866-631-3470 and learn about the protections of the attorney-client privilege, as well as the accounting and tax expertise available through one single source: Allen Barron.