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OVDP: Offshore Voluntary Disclosure

OVDP Offshore Voluntary Disclosure

The OVDP program allows for taxpayers to work with the IRS, and get current with their tax returns, pay penalties on undisclosed income, and in general, come clean about monies located in offshore accounts. While penalties are still incurred, it is wiser to clear up any issues now, rather than wait for the Internal Revenue Service to discover the money. If this were to happen, the taxpayer would likely face even higher penalties, as well as possible criminal prosecution.  

What’s Involved in the Process of OVDP?

Getting started with the OVDP program requires the completion of several forms.  The first is Form 114, Report of Foreign Bank and Financial Accounts, also known as FBAR. This can be filled out online using the Bank Secrecy Act’s website.  Next, forms 433A and 433B are needed. The first is a Collection Information Statement for Wage Earners and Self Employed Individuals, while the second is the same statement for Businesses.  Also required is form 872, Consent to Extend the Time to Assess Tax.  This form allows the Internal Revenue Service additional time to assess any tax liabilities as a result of the information received.

Once these initial forms have been completed, there are additional documents that need to be reviewed and signed. These include form 14452, Foreign Account or Asset Statement.  This form allows the taxpayer to provide detailed information about foreign accounts, the source of the funds, as well as other information.  In addition, the taxpayer must fill out an Offshore Voluntary Disclosure Letter, as well as any necessary Attachments. These documents are used to determine acceptance into the OVDP program. 

Once these forms are complete, a  Consent to Extend the Time to Assess Civil Penalties for FBAR Violations Form must also be signed.

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Penalties

These forms can be intimidating, and quite scary. The IRS is asking for a lot of information regarding the offshore account, and it might be tempting to simply ignore this task, and hope the IRS never detects the account. However, this approach presents tremendous risk to a taxpayer.  Civil penalties could be assessed for actions such as failing to file an FBAR, failing to file form 8938, which reports the taxpayer’s interest in foreign accounts and failing to file form 3520, which is the Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.  This list is not all-inclusive, as there are many other violations. All of these could result in the assessment of penalties, which could be as high as $50,000 per violation. In addition, a taxpayer could face criminal charges for these same issues.

If you have willfully hidden funds in foreign accounts, then OVDP is the best way to come clean. File 8 years back of income tax returns, 8 years back of FBAR reports, pay taxes, interest and pay up to 27.5% penalties on the highest balance over 8 FBAR years reported, but AVOID CRIMINAL PROSECUTION. Penalties may increase to 50%, if your offshore financial institution or the facilitator who helped you to open the offshore account, is under government investigation.

Taking Action

If you are a taxpayer with an offshore account and want to pursue the OVDP Program, contact an experienced tax professionaat FAS CPA & Consultants today with just one Click Here or email us to support@fascpaconsultants.com and get a free consultation. Our team can provide assistance in getting all of your tax matters resolved quickly and efficiently.

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA is a Certified Public Accountant, specialized In Tax Planning, International Business, Wealth Management and Offshore Banking. You can email him to fa@fascpaconsultants.com or follow us on Facebook : FAS CPA & Consultants.

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