The OVDP Opt OutNews
Posted in on February 24, 2017
The Offshore Voluntary Disclosure Program (OVDP) is a program allowing for U.S. taxpayers to voluntarily report offshore accounts that they had failed to report to the IRS in the past. Depending upon the value of your offshore account and whether you live in the U.S. or abroad, you may have been required to file a Report of Foreign Bank and Financial Account (FBAR) and/or a Form 8938, Statement of Specified Foreign Financial Assets. If you failed to comply with reporting requirements, OVDP gives you the chance to come forward and correct the situation before the IRS comes after you.
If the IRS investigates your failure to follow reporting rules for offshore accounts, you will no longer be eligible for OVDP. You could face the potential for criminal charges, and the penalties could be very substantial. In many cases, individuals who failed to file FBARs faced civil financial penalties greater than the actual value of their offshore accounts. OVDP allows you to avoid criminal penalties and limit civil penalties you face.
However, after you have submitted your voluntary disclosure materials, you may have a chance to opt-out of the civil penalty structure that is imposed by OVDP. Making the decision of whether to take advantage of an OVDP opt-out option or not can be very complicated. You should speak with Maryland international tax lawyers to find out what your best course of action is to protect your finances as much as possible.
What is the OVDP Opt Out?
After you submit all of your disclosure material that is required by the Offshore Voluntary Disclosure Program, the IRS will issue a Form 906, Closing Agreement. You can sign this Closing Agreement to fully resolve your tax issues related to the previously undeclared offshore account. By signing, you agree to pay the designated penalties as established by OVDP. You cannot negotiate to try to pay less in taxes because the taxing officials who process voluntary disclosures are not vested with the power to negotiate penalties under the OVDP's terms.
What you can do, if you want to, is exercise the OVDP opt-out option. This option is available under streamlined offshore voluntary disclosure programs and was available under other OVDP iterations as well. If you exercise the opt-out option, you then have the opportunity to request a reduced penalty or even to request a waiver of penalties.
If you opt out, you should be aware it will take longer for your tax issues to be resolved as compared with if you'd simply signed the Closing Agreement. There is also the risk you won't be able to effectively negotiate for a reduced penalty or a waiver.
Maryland international tax lawyers like Kevin Thorn can assist you in identifying whether an opt-out is possible for you after you have made your initial disclosures. Our legal team can also help you to do everything possible to try to successfully get penalties reduced or waived if you do choose the OVDP opt out. To find out more about how we can help you as you voluntarily disclose offshore accounts that weren't previously in compliance, give us a call today.Share This Post