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Offshore Voluntary Disclosure Program - Certain Current Participants Eligible for Streamlined Program.

Most persons residing in the United States and abroad have heard of the IRS' increasing scrutiny of U.S. Taxpayers' offshore financial accounts. Taxpayers with interest in foreign financial accounts whose aggregate balance exceed $10,000 are required under the Bank Secrecy Act to report such accounts to FinCEN on a yearly basis. Failure to do so comes with the possibility and threat of steep civil and criminal penalties. Many Taxpayers, including immigrants to the United States and expatriates doing business abroad, neglected this reporting requirement.

OFFSHORE VOLUNTARY DISCLOSURE PROGRAM

The IRS has created various programs to assist Taxpayers to come forward with their noncompliance. The most recent program is the 2012 Offshore Voluntary Disclosure Program "OVDP". OVDP imposes a steep 27.5% penalty on the highest aggregate balance of a Taxpayer's foreign financial accounts. Aside from two limited exceptions, the only way to reduce the penalty is by "opting-out" of the program and arguing reasonable cause basis. For many Taxpayers who have offshore accounts for non-tax-avoidant reasons 27.5% is a steep price to pay.

STREAMLINED PROGRAMS

On June 18, 2014, the IRS published a new set of rules affecting participants in the current OVDP (and prior OVDI). Under the new Streamlined Domestic Offshore Procedures, those who qualify can elect to be considered under the new rules by certifying non-willfulness. Accepted U.S. persons living in the United States would be eligible for a 5% offshore penalty. Those residing outside the United States would face a 0% offshore penalty. This program eliminates the need to opt-out of OVDP.

Taxpayers who believe they are eligible must first submit all documents required under the voluntary program in which they are participating. This means under OVDP, Taxpayers shall submit all eight years of prior amended tax returns and FBAR reports, along with full payment of tax, interest and penalties for the returns. In addition, a written statement signed under penalties of perjury certifying non-willfulness with respect to all foreign activities and asset is required. This statement must specifically describe why you did not report the income, pay the tax ore submit FBARs. Therefore, Taxpayers must carefully consider whether they fall under the "non-wilfullness" criteria prior to electing to be considered under Streamlined.

Tags: tax fraud

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