Updates to the Offshore Voluntary Disclosure Program Effecting Clients in New Jersey & NationwideOffshore Account Update
Posted in on June 20, 2014
The Offshore Voluntary Disclosure Program (OVDP) has existed since 2009 to allow taxpayers to come forward and report offshore accounts they had previously failed to disclose to the Internal Revenue Service (IRS). Both individuals living abroad and individuals within the United States must report offshore accounts annually and can face penalties and fines if they fail to do so.
Unfortunately, the OVDP was very limited and only non-resident non-filers could take advantage of streamlined procedures to report offshore accounts that were non-compliant while minimizing or avoiding penalties. Now, the IRS has expanded the OVDP to apply to more taxpayers. The rules have changed for both willful and non-willful violators and now is the time to become familiar with the OVDP and to take action if you have not done so already. An experienced New Jersey offshore voluntary disclosure attorney can help you to determine if you are eligible and can guide you through the process.
Detailed Changes to the Offshore Voluntary Disclosure Program Explained
With the recently announced changes, the OVDP is now entering its third generation. More than 45,000 people have already taken advantage of the OVDP to declare foreign offshore accounts and avoid penalties. Now, both individuals living abroad and certain people within the United States may take advantage of streamlined procedures for coming forward.
Eligible taxpayers who are living in the United States will face penalties of just five percent of the non-reported financial assets if they come forward and certify that their violations of tax reporting rules were not willful. Eligible taxpayers living abroad will have penalties waived with participation in the OVDP streamlined reporting program. With this change, the existing reduced penalties for non-willful violators are no longer necessary and have been eliminated.
The IRS has also eliminated the requirement that taxpayers must have $1,500 or less in unpaid tax liability to participate in the OVDP. The required risk questionnaire is no longer necessary either, and taxpayer are now able to submit their records and statements electronically.
Changes were also made for willful violators seeking to avoid criminal prosecution. Willful violators may face increased penalties if they come forward now as compared with past penalties. They also must submit all account statements at the time of applying to the program.
Both willful and non-willful violators should not hesitate to submit a request for OVDP pre-clearance. If the IRS or the Department of Justice begin investigating the bank where your offshore account is being held before you have requested pre-clearance, the penalties have now increased. The prior penalty was 27.5 percent, but is now increased to 50 percent.
The IRS and the Department of Justice are dedicating more resources to investigating offshore banks and more than 100 Swiss banks have also accepted a deal with the Department of Justice that involves making full disclosure of American accounts.
These factors, combined with the fact that provisions of the Foreign Account Tax Compliance act (FACTA) are going into effect on July 1, mean that you have a very limited time to act to protect yourself from penalties. Call a Washington New Jersey offshore voluntary disclosure attorney today to get started and protect your offshore accounts.