A taxpayer who has not disclosed foreign bank accounts to the IRS can be charged with substantial miscellaneous Title 26 offshore penalties that ultimately can wipe out a taxpayer’s foreign assets. Disclosure is made by e-filing FinCEN Form 1114 (formerly Form TD F 90-22.1), Report of Foreign Bank and Financial Accounts (“FBAR”). The civil penalty for willful failure to file an FBAR equals the greater of $100,000 or 50% of the total balance of the foreign account per violation. The government may also pursue criminal prosecution which can result in up to fice years of jail time. Non-willful violations that are not due to reasonable cause incur a penalty of $10,000 per violation.
The IRS has established a program called the Offshore Voluntary Disclosure Initiative (“OVDI”) whereby taxpayers can avoid criminal prospection and the penalties are reduced.
With the deadline of June 30th approaching for the filing of a 2013 FBAR and the full implementation of FATCA starting July 1st, a taxpayer who is non-compliant with the reporting of foreign accounts and foreign income has an important decision to make. OVDI – Are You In Or Out?
Offshore Voluntary Disclosure Initiative (“OVDI”)
This program was first created in 2009 as the Offshore Voluntary Disclosure Program (“OVDP”) but in 2011 was renamed to OVDI. Generally, the miscellaneous offshore penalty under the OVDI program (the “OVDI penalty”) equals 27.5% of the highest aggregate balance in the foreign assets or entities during the years covered by the OVDI program, but may be reduced in limited cases to 12.5% or 5%. Certain taxpayers may qualify for even greater savings through a reduction of the offshore penalty.
Taxpayers participating in the ongoing 2012 OVDI generally agree to file amended returns and file FBARs for eight tax years, and in addition to paying pay the OVDI penalty (which is assessed in lieu of all other potentially applicable penalties associated with a foreign financial account or entity) taxpayers would pay the appropriate taxes and interest together with an accuracy related penalty equivalent to 20% of any income tax deficiency
Taxpayers whose highest aggregate foreign account balance is less than $75,000 for each of the years in the OVDI disclosure period may qualify for a reduced 12.5% OVDI penalty.
Taxpayers who fall into one of three specific categories may qualify for a reduced 5% OVDI penalty. The first category includes taxpayers who inherited the undisclosed foreign accounts or assets. Second, taxpayers who are foreign residents and who were unaware that they were U.S. citizens may qualify for a reduced 5% OVDI penalty. Finally, U.S. taxpayers who are foreign residents may also qualify for the reduced 5% OVDI penalty in certain circumstances.
What Should You Do?
Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (“OVDI”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.
Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDI.
Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.