Expanded OVDP a chance to reduce penalties

Scott Novak, Esq., in The Journal of Accountancy, writes about the IRS’s expanded offshore voluntary disclosure program (“OVDP”).

The article begins as follows:

The new information-reporting requirements of the Foreign Account Tax Compliance Act (FATCA), P.L. 111-147, took effect on July 1. Among other things, FATCA requires foreign financial institutions (FFIs) to report on their accounts held by U.S. taxpayers.

More than 77,000 FFIs signed on and acquired approved status in the initial round of FFI registration (see tinyurl.com/ku29njb for a list). According to Treasury (tinyurl.com/q6vg7nj), as of early July, 39 countries had entered into intergovernmental agreements with the United States (with more than 60 others having reached agreements in substance) under which they will permit or require financial institutions within their borders to report on U.S. account holders. For practitioners and their clients, this means that, eventually, most hidden foreign financial accounts will come to light. A new expansion and modification of the IRS’s Offshore Voluntary Disclosure Program (OVDP) may make it more attractive for certain owners of such accounts to come forward. The provisions, announced June 18, ease the options available to taxpayers who have not yet come forward, but in some circumstances could make them harsher.

Realizing that the previous OVDP rules’ 27.5% penalty may have been too harsh or restrictive for some taxpayers, the IRS expanded a streamlined reporting program to apply in more situations. If a taxpayer’s conduct relative to a foreign account could be deemed willful, it likely remains best for him or her to go into the OVDP and pay the penalties (and back taxes and interest) and likely avoid the risk of criminal prosecution and much steeper potential penalties. Under the three previous iterations of the OVDP, approximately 45,000 taxpayers have come forward, and the IRS has brought in $6.5 billion in additional taxes, interest, and penalties as a result

Read the full article at Expanded OVDP a chance to reduce penalties.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.