2016 Update for Voluntary Disclosure
The Government is Turning up the Heat on Offshore Tax Evasion
Taxpayers are facing tremendous pressure as the Internal Revenue Service and the U.S. Department of Justice (DOJ) make offshore tax evasion a top enforcement priority. The fines and penalties associated with undisclosed offshore bank accounts can be staggering. At Thorn Law Group, our attorneys know what options and defenses are available to taxpayers with undisclosed overseas accounts. We strive to achieve the best results possible in every case we handle.
Our tax attorneys have an in-depth understanding of IRS voluntary disclosure and tax amnesty programs and have helped hundreds of clients throughout the U.S. and abroad bring their undisclosed offshore accounts into full compliance with U.S. tax laws and regulatory requirements.
2014 to 2016 IRS Voluntary Disclosure Program
The IRS created its first offshore voluntary disclosure program (OVDP) in 2009 in an effort to entice taxpayers with undisclosed overseas accounts to voluntarily come forward and disclose their accounts to the IRS. Under the 2009 OVDP, certain taxpayers who voluntarily reported their previously undisclosed offshore accounts would have the chance to avoid criminal prosecution and become eligible for reduced fines and penalties in the form of a “miscellaneous offshore penalty.”
In 2011, the IRS replaced the 2009 OVDP with the Offshore Voluntary Disclosure Initiative. Based on the success and strong taxpayer participation in these two programs, the IRS launched a third offshore amnesty program in 2012 – The 2012 Offshore Voluntary Disclosure Program.
In June 2014, the IRS announced important revisions to the 2012 OVDP. The 2014 changes are aimed at increasing the number of taxpayers voluntarily coming forward to disclose their unreported offshore bank accounts. The IRS modifications include expanding eligibility criteria for the streamlined filing compliance process as well as changes to a number of other important program terms and conditions.
In the past, only non-resident, non-filers were able to take advantage of the OVDP streamlined filing process, but under the 2014 OVDP, additional taxpayers who are residing abroad as well as some taxpayers who are living within the United States will be now be eligible to participate in the streamlined process.
Key changes to the streamlined program include:
- Removing the $1,500 cap on unpaid tax liabilities per year;
- Eliminating the previously required risk questionnaire;
- Adding a new requirement mandating taxpayers to certify that their failure to disclose an offshore account was not willful in nature;
- Waiving all penalties for non-willful violations for eligible taxpayers residing outside of the United States; and,
- Limiting penalties for non-willful violators residing in the United States to five percent of the foreign assets that were not properly reported to the Internal Revenue Service.
The IRS also made important program changes which will impact taxpayers who acted willfully to hide their offshore accounts and assets from the federal government. Under the 2014 OVDP, willful violators seeking to participate in the program will have to meet a number of new terms and conditions, including:
- Submitting more information when applying to the program, including providing the IRS with all of their account statements;
- Paying their offshore penalties when they submit their OVDP application to the IRS; and,
- Paying an increased offshore penalty (50% compared to 27.5%) should it become public that the IRS or the DOJ has launched an investigation of the bank where the taxpayer’s accounts are held before the taxpayer submits the pre-clearance request to the IRS.
It is Important to Take Action Now
Taxpayers who are considering participating in the 2014 OVDP should discuss their situation with an experienced team of tax attorneys. While you may be eager to bring your offshore accounts into legal compliance, you should consider several critical factors before applying to an IRS amnesty program. Thorn Law Group can help you evaluate all of your options and determine whether the OVDP is right for you.
If you have concerns regarding your offshore bank accounts or assets, we encourage you to contact Thorn Law Group today through our online contact form or call us at:
Washington D.C. Office:
New Jersey Office:
We also invite you to learn more about IRS tax amnesty and offshore voluntary disclosure programs by reviewing the following pages on our site: