Understanding OVDP – the Offshore Voluntary Disclosure Program

What is OVDP?

OVDP, or Offshore Voluntary Disclosure Program, is an initiative giving taxpayers with unreported foreign accounts the opportunity to disclose the existence of these undisclosed offshore bank accounts and assets.

The OVDP was modified on June 18th, 2014 and clarified on Sept 10, 2014 for filers commencing July 1, 2014. The program, as modified, is now known as the 2014 OVDP. The IRS has made it clear that this program may be discontinued at any time.

Entering into the OVDP may help a taxpayer to reduce potential civil and criminal penalties, fines and interest.

The program is available to anyone except those who are already under IRS audit, those whose unreported income came from illegal activity, and those engaging in offshore tax avoidance schemes.

OVDP PENALTY AND FILING REQUIREMENTS

Those entering the OVDP may be subject to back taxes, interest, a 20% accuracy penalty, failure to file penalties, and a miscellaneous offshore penalty of 27.5%.  If a taxpayer’s conduct relative to their foreign accounts could be deemed willful, OVDP likely remains the best option, as it will likely help avoid the risk of criminal prosecution and much steeper potential penalties.

SHOULD I ENTER THE VOLUNTARY DISCLOSURE PROGRAM?

The OVDP is extremely complex. The ultimate decision of whether to enter into either the OVDP or the new IRS Streamlined Filing Program is one that should be made only after a careful and full analysis of all of the factors. Legal counsel is a must, especially since there is potential criminality involved. If you don’t enter OVDP and are audited, the IRS is issuing pointed Information Document Requests and demanding that taxpayers appear for in-person interviews. Many are referred to the Criminal Investigation Division, where steep civil penalties of 50 percent per year are being imposed.

To reiterate, please note that Offshore Voluntary Disclosure cases are typically handled by IRS Criminal Investigation.  A CPA or Accountant does not have client privilege as to criminal tax investigation or tax prosecution.  As such, it is imperative that you use an attorney to handle these situations.

TAKE ACTION WITH HELP OF AN EXPERIENCED OVDP ATTORNEY

To discuss your options with regard to your specific situation, contact Freeman Tax Law. Our experienced and dedicated OVDP attorneys can consult with you on international tax compliance issues and any other additional wealth management matters you require assistance on. Due to our specialized knowledge in the area of international tax law and tax controversy, we are a boutique tax law firm that is able to provide comprehensive guidance on voluntary disclosure of offshore accounts to get into compliance and assisting in wealth transfer issues and tax compliance in these often complex matters.

It is important to recognize that these compliance issues are complex. We work with clients’ accountants and financial advisers to structure these investments properly or transfer assets to the United States. Take this problem seriously as delays and inaction can potentially make your situation far worse. It is generally better to approach the IRS and make a disclosure of foreign financial accounts before the IRS comes to you.

To talk with a proven OVDP attorney with significant experience in handling these types of cases, please contact us today.


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