OVDP Ends in September: What Does This Mean for Offshore Investors?Offshore Account Update
Posted on March 30, 2018 | Share
If you are obligated to file tax returns and pay taxes in the United States, you have certain obligations with respect to any foreign accounts you maintain. U.S. affiliated taxpayers are expected to declare all of their offshore accounts to the IRS. Taxpayers also must pay taxes on the income they earn through investments in offshore accounts.
Many taxpayers do not comply with the requirements for reporting offshore accounts and paying income taxes on offshore assets – and the IRS knows it. That's why in recent years the IRS has tried a number of aggressive tactics to find offshore investors, including allowing financial institutions to enter into non-prosecution agreements for the bank's own part in facilitating tax evasion – if the bank gave up details on customers.
In addition to investigating banks and obtaining information needed to go after taxpayers, the IRS also tried another approach to getting offshore investors to come forward. The IRS created a voluntary disclosure program whereby offshore investors not in compliance with tax rules could come forward; disclose the accounts; pay a penalty that was less than what would have been assessed if the IRS found the account on its own; and avoid the potential for criminal prosecution.
The first version of this voluntary disclosure program was put in place in 2009, and the program was subsequently modified substantially in 2014. However, for years, offshore investors have had the chance to get right with the IRS by making a voluntary admission they had offshore accounts. Now, however, voluntary disclosure is ending.
This means you could lose the chance to reduce penalties by admitting your mistakes if you don't act by the deadline. It does not, however, mean you should definitely act by this deadline and come forward. Before you decide on the best course of action, you need to talk with a New Jersey tax evasion attorney.
Voluntary Disclosure Program is Coming to an End
The IRS indicated that the Offshore Voluntary Disclosure Program (OVDP) that is currently in place will be ending on September 28, 2018. The IRS made the announcement very early in order to give people considering participation in OVDP more time to take action before it becomes too late to join.
Many people have already participated in OVDP, with the IRS collecting around $11.1 billion in back taxes, fees, and penalties from an estimated 56,000 people who came forward to report their undeclared offshore accounts. However, the number of participants has dropped in recent years. While 18,000 people participated in the first voluntary disclosure program in 2009, just 600 people came forward to report their offshore accounts in 2017.
Now, those who have not yet come forward will lose the chance to participate in OVDP if they don't act quickly. The IRS will continue to investigate offshore investors and has a number of tools at its disposal to help find investors with undeclared accounts – including information from banks that participated in the Swiss Bank Program to avoid criminal prosecution for their own roles in tax evasion. The Swiss Bank Program required banks to pay fines and offer detailed information about investors.
While there's a strong chance the IRS could find your account if you don't come forward, this does not necessarily mean that participation in OVDP will be the best choice for you. New Jersey tax evasion attorney Kevin Thorn can help you to decide what to do before the deadline arrives.