What is the Offshore Voluntary Disclosure Program and How Does it Help?
What is the Offshore Voluntary Disclosure Program?
According to the IRS, the Offshore Voluntary Disclosure Program (OVDP) is “a voluntary disclosure 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 other words, the OVDP allows people who haven’t previously disclosed their offshore assets to the government to do so, and get in compliance with US tax laws.
Who is eligible?
In order to be eligible for the Offshore Voluntary Disclosure Program, applicants must meet the following criteria:
1) The applicant has invested legal source funds in the undisclosed assets – that is, funds derived legally, not from criminal activity
2) The applicant has not made a submission pursuant to a streamlined procedure
3) The applicant is not under civil examination or criminal investigation by the IRS
People from all walks of life and professions can apply for the Offshore Voluntary Disclosure Program, and the benefits are many. Most importantly, the OVDP allows people who intentionally did not disclose their offshore income and assets to the U.S. government to avoid high fines and legal penalties. Remember that old saying: “Nothing is certain but death and taxes?” Even if you’ve been successful in avoiding the sticky fingers of the IRS, chances are, not disclosing your offshore assets and income to the American government is not something you’ll be able to get away with for long. And if you’re caught in non-compliance with U.S. tax laws, the penalties can be steep, and they may even include charges of tax fraud and a stint in the big house.
Why was it implemented?
The OVDP was developed in order to encourage people with offshore income and assets to report that income to the U.S. and get in good standing with the IRS. In an exchange for taking part in the Offshore Voluntary Disclosure Program, participants won’t be criminally prosecuted, and any tax non-compliance older than eight years is forgiven.
What Are the Requirements to Participate in the OVDP?
In order to participate in the Offshore Voluntary Disclosure Program and avoid criminal prosecution or high fines for non-compliance, participants must do the following:
1. File or amend up to eight years of tax returns
2. File or amend up to 8 years of Foreign Bank Account Reports (FBARs)
3. Pay back any taxes, interest, and penalties owed
4. Pay a penalty ranging from 27.5% to 50% on the highest value of unreported assets
5. Complete a variety of questionnaires
While these requirements may sound steep, participating in the Offshore Voluntary Disclosure Program can also help you avoid much more serious consequences, from investigation by the IRS to the seizure of your assets, to prison time. If you’ve been in non-compliance with US tax law, it’s crucial that you contact a lawyer that specializes in OVDP and international tax law in order to remedy your relationship with the IRS. The OVDP is designed to provide U.S. taxpayers who are in non-compliance with protection from being held criminally liable for their actions, as well as with a way to resolve their civil tax and penalty obligations.
Since the Offshore Voluntary Disclosure Program was launched in 2009, more than 56,000 taxpayers have participated in the program and have complied voluntarily to resolve their non-compliance issues.
Consult a Lawyer, and Act Fast
International tax law can be very confusing; different countries have different tax laws, and staying in full compliance with that country’s and U.S. laws may seem complicated. If you think, however, that you’re a candidate for the Offshore Voluntary Disclosure Program, your first step is to contact a professional tax lawyer who specializes in OVDP and international tax law. He or she will be able to walk you through the process, making sure that all your forms are filled out properly and on time and that you are meeting the requirements of the program in full.
But you need to act fast. Last March, the IRS announced that it planned to end the Offshore Voluntary Disclosure Program on September 28, 2018; the IRS has decided that the program has fulfilled its mandate to help taxpayers come into compliance with US tax laws. Fortunately, those who haven’t participated in the OVDP as of yet may have other avenues available to them to settle their accounts with the IRS, but it’s crucial that they act swiftly to avoid hefty, even life-altering consequences.