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OVDP (Offshore Voluntary Disclosure Program) May Put You Right with the IRS if You Did Not Disclose Foreign Bank Accounts

The IRS has a program in place where people who have foreign bank accounts they have failed to disclose can come forward voluntarily and avoid criminal charges. The Offshore Voluntary Disclosure Initiative is also sometimes referred to as OVDP, Offshore Voluntary Disclosure Procedure – both refer to the same program through which those holding undisclosed foreign-held bank accounts volunteer that information to the IRS. OVDI offers criminal immunity (in most cases) when unpaid taxes are paid along with heavy financial penalties. OVDI may also result in FBAR (Foreign Bank Account Reporting) penalties, which are penalties for failing to report a foreign bank account. Foreign accounts must be reported each year on a Report of Foreign Bank and Financial Account (FBAR).

If you plan to voluntary disclose your offshore accounts or would like more information about OVDI/FBAR or maintaining your offshore accounts, contact Ayar Law to speak with a qualified local offshore tax attorney for help navigating the process. Failing to disclose may result in annual penalties on the highest annual balance in your account, and fines can well exceed account balances.

Who needs to worry about OVDP

Be particularly concerned about potential OVDI reporting if you are an American citizen with dual citizenship, a foreign national holding an American visa, or an American citizen living abroad. The IRS has dramatically increased powers for collection information and is levying devastating penalties on those who fail to pay taxes or voluntarily report since first introducing the program in 2009. Disclosing as early as possible and getting into compliance is key.

Recent Changes in the OVDP

On June 17, 2014, the IRS announced the 2014 OVDP. Under the 2014 OVDP program, some taxpayers faced an increased FBAR penalty of 50% (though most pay 27.5% or less), as compared with the 2012 OVDI 27.5% maximum FBAR penalty. In 2011 the penalty was 25%; in 2009 it was only 20%.

Projections indicate this penalty will only increase in the future, making it important to tackle your OVDI reporting as soon as possible. Any penalties levied against you can be appealed to the IRS Office of Appeals, then to Tax Court, and even all the way up to the United States Supreme Court. The sheer number of new tax court cases filed annually and the number of OVDI reports filed overwhelms the IRS. In 2011 IRS Commissioner Douglas Shulman announced disclosures at nearly 12,000. By May of 2013, nearly 3,000 had already been filed.

Having an attorney who understands the workload at the IRS, its settlement rate and the inside track of tax court is invaluable. Ayar Law is the firm you can trust to work you through the OVDI process and broker a deal acceptable to the IRS, but, even more important, they can help turn around your accounting to avoid being an IRS target in the future. Contact Ayar Law to speak with a qualified local offshore tax attorney for help navigating the OVDI process.

Read More about FBAR and OVDP