New Jersey Tax Attorney Explains OVDPArticles/News, Hot Topics, Offshore Account Update
Posted in on June 24, 2014
Since 2009, the Offshore Voluntary Disclosure Program (OVDP) has made it possible for more than 45,000 taxpayers to declare offshore foreign accounts that they had failed to disclose in the past. The OVDP was designed to reduce penalties that would be associated with a failure to disclose a foreign account. Unfortunately, the program was very limited and many people who wanted to take advantage of it were unable to do so.
The IRS has now announced a broad expansion to the program that will make it available to many more individuals both inside and outside of the United States. With the IRS and the Department of Justice dedicating more resources to cracking down on foreign banks and with the Foreign Account Tax Compliance Act going into effect on July 1, now is the time for taxpayers to take advantage of the expanded OVDP program. Contact an experienced New Jersey tax lawyer to learn more.
Changes to the OVDP
The OVDP is now entering its third generation, and the chances that were recently announced were made in response to feedback from tax preparers and from the National Taxpayer Advocate. While IRS Commissioner John Koskinen described the new OVDP shifts as “technical in nature,” the IRS has made substantial alterations to how OVDP works both for willful and for non-willful violators.
The most important change for most taxpayers is an expansion of the streamlined procedures for coming forward under the OVDP program. While previously only non-resident non-filers were able to take advantage of the OVDP streamlined procedures, the expanded OVDP program now applies both to more taxpayers who are living abroad as well as to some people who are living within the United States.
For eligible taxpayers who are living abroad and who are non-willful violators, all penalties will be waived if foreign accounts are voluntarily reported through the OVDP. For eligible taxpayers living in the U.S, the penalty will now be set at five percent of the foreign financial assets that were not reported in violation of tax compliance rules. The existing reduced penalties for non-willful violators are eliminated with this OVDP update because they are no longer necessary since the streamlined procedure is expanded.
The new OVDP changes also eliminated a requirement that taxpayers have $1,500 or less in unpaid tax liability, and eliminated the required risk questionnaire.
Non-willful violators must certify that their previous failure to report the offshore assets was non-willful and must provide additional information about the offshore accounts. Paperwork may now be submitted electronically.
For willful violators, the focus of the OVDP is now shifting to focus on individuals seeking certainty and relief from criminal prosecution. Willful violators must come forward and submit all account statements at the time when they apply to the program. They may face increased penalties that are larger than in the past, and must provide more information than before.
Both willful and non-willful violators should act now. If you have not yet submitted a request for OVDP pre-clearance and the bank where your offshore account is being held comes under investigation from the IRS or the Department of Justice, the offshore penalty percentage is increasing from 27.5 to 50 percent. Call an experienced New Jersey tax attorney to get started on submitting your OVDP pre-clearance request to protect your assets from significant penalties.