Understanding the IRS Compliance Programs

Answering your frequently asked questions about the offshore voluntary disclosure programs (OVDP) and streamlined IRS compliance procedures

Jeffrey S. Freeman, J.D., LL.M

irsThe IRS is hoping to provide greater flexibility to appeal to a greater audience if taxpayers that have been waiting to come into IRS compliance with their taxes. Previous programs have allowed 45,000 individuals to come forth and understanding the different programs can help you decide if now is the time to clean up your foreign offshore account taxes.

Q1 – Is the Offshore Voluntary Disclosure Program (OVDP) or Streamlined Compliance Procedure a new program?

No, both programs have several years of proven success. Changes have been made to both programs. The Streamlined Compliance Procedure is appropriate for those that non-willfully did not comply with tax rules for their offshore funds. The OVDP has steeper penalties which correspond to the willful intent of the taxpayer utilize an foreign offshore bank account evade taxes.

Q2 – What are the penalties under the two programs?

The Streamlined Compliance Program has a 5% miscellaneous penalty on the foreign assets that caused the non-compliance issue. The OVDP has a 27.5% penalty, which could increase to 50% if the foreign institution that the foreign offshore bank account was held with is investigated by the Department of Justice or IRS.

Q3 – What criminal penalties or charges does the OVDP protect the taxpayer from?

The OVDP protects taxpayers from possible criminal charges steming from tax evasion or concealing tax payment, filing false returns, and failing to file income tax returns. Failing to file an FBAR or filing a false FBAR are separate charges and subject to criminal penalties. Conspiracy and fraud provisions can also be invoked.

Q4 – When should taxpayers seek to take advantage of these programs?

Immediately. The IRS is able to change the terms of these programs at any point in time. With additional information flooding in daily from offshore foreign financial institutions it is risky to continue to be noncompliant. The best option is to clean up your tax responsibility before the IRS comes looking for you.

About Freeman Tax Law

Freeman Tax Law is equipped to handle all domestic and international tax law matters. At Freeman Tax Law, the attorneys and professional staff have vast experience with foreign tax compliance, international tax planning, and resolving tax controversies involving offshore banking matters. Freeman Tax Law helps taxpayers and foreign entities become in compliance with laws such as Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP). In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning.

Freeman Tax Law

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