OVDP Participation: Know the RequirementsOffshore Account Update
Posted in on March 11, 2016
If you had money offshore and didn't file annual Reports of Foreign Bank and Financial Accounts (FBARs), you could find yourself facing penalties imposed by the Internal Revenue Service (IRS). Banks are cooperating with the IRS and giving detailed account information about people with offshore funds. If the IRS determines you failed to follow the rules for reporting offshore accounts and paying taxes on income, there's the potential for criminal consequences.
You may be able to take the chance of criminal prosecution off the table and limit financial consequences of failure to file FBARs. You could do this if you can qualify for the Offshore Voluntary Disclosure Program (OVDP). A New Jersey tax law attorney can offer assistance in determining if qualifying is possible and if OVDP participation is the smartest financial choice in your situation.
What Is Required for OVDP Participation?
While financial penalties for voluntarily coming forward under OVDP have been increased, the penalties are still going to be less costly than if the IRS investigates and comes after you without you choosing to disclose on your own.
OVDP participation is often a good option because more of your money can usually be preserved instead of lost to the government; however, you need to find out if OVDP participation is a viable option. There are many requirements, to include:
- Demonstrating that your failure to file FBARs wasn't a willful one
- Completing, signing and providing an Offshore Voluntary Disclosure letter
- Providing copies of all the original tax returns filed with the federal government during the years that you're disclosing you broke the rules regarding reporting offshore income
- Providing completed amended federal tax returns and supporting schedules for the affected years, including detailing any income from foreign sources that was left off the original tax return
- Signing an agreement to allow an extension of the time available for the IRS to assess taxes and penalties for failure to file FBARs
- Providing copies of all FBARs you have filed
- Providing statement copies showing account activity for all financial accounts during the period for which you're disclosing secret offshore money
- Identifying all foreign entities you hold, even if the entities are indirectly yours. You must provide identifying details of the foreign entities in your statement.
- Completing forms 3520, 3520-A, and other related forms for taxpayers disclosing foreign entities
- Providing gift and estate tax returns, if there are any issues with either gift or estate taxes in connection with undeclared offshore accounts or offshore income
- Paying the penalties as outlined in Internal Revenue Code Section 6662(a). Penalties are based on full amount of underpayments on offshore income in all tax years
- Paying penalties both for failure to file and failure to pay, as outlined in IRC sections 6651(a)(1) and 6651(a)(2)
- Paying a miscellaneous penalty outlined in Title 26, which is calculated based on the highest aggravate value of funds which were kept offshore over the period of time during which you admit you failed to follow IRS rules
- Agreeing to provide information on banks that helped you and cooperating with the IRS and Department of Justice further efforts to fight offshore tax evasion
Attorney Kevin Thorn can assist you in assessing options, determining if voluntary disclosure is a good choice, and meeting the requirements for participation in OVDP. Get legal help today if you are concerned about your undeclared offshore funds.