When it comes to foreign bank account reporting, understanding your options is your best chance for receiving minimum penalties. While the Offshore Voluntary Disclosure Program (OVDP) offers benefits to those who come forward and report their illegal offshore accounts before undergoing a tax audit, the IRS has developed several different OVDP options to ensure that taxpayers have the best choice available for their situation. The most notable are the original program and the streamlined OVDP, introduced in 2014.
Developed in 2009, the first version of the OVDP offered United States taxpayers the option to report, with little to no criminal charges, offshore assets that they had previously concealed. While it often meant that the taxpayer would foot a fee that could be up to 50 percent of the disputed account’s value, this seemed like inconsequential compared to decades in prison and an even larger fine were they to not report the assets and be audited by the IRS.
The streamlined OVDP process was introduced in 2014 as an answer to the frustration that taxpayers faced who had no criminal intent. The IRS specifically developed this option for those being treated as criminals, who had to endure the long filing process and pay heavy fines when they didn’t know they were acting illegally. In this way, these taxpayers could feel more confident reporting their offshore assets.
The Difference Between Streamlined OVDP and the Original Program
Because of the nature of the processes, you cannot participate in both the streamlined version and the 2009 version of the OVDP. This means that you must choose one or the other, and applying for one will disqualify you for the other.
This is the key difference between the two programs. The original 2009 process was developed specifically for those who willfully concealed their foreign assets with the knowledge that it was illegal and the intent to evade taxes. The streamlined 2014 process was developed specifically for those who either did not understand the laws associated with foreign bank account reporting, or had no knowledge of their offshore assets. In this case, there was no criminal intent.
Under the 2009 program, those who report their illegal foreign assets before the IRS performs a tax audit will be charged, in general, 20 to 50 percent of the highest aggregate value of their illegal or unreported foreign assets during the years that the accounts went unreported, according to the IRS.
Under the 2014 program, taxpayers are only charged a fine of five percent of their highest aggregate value during the unreported years.
Under the 2009 program, taxpayers are protected from any criminal or civil penalties.
Under the 2014 program, taxpayers could face enormous fines and jail time if they are found to have criminal intent. They will face criminal charges, not only for having the unreported foreign accounts, but also for perjury.
There are several important differences between the 2009 OVDP and the streamlined OVDP, so it is essential that you consult with your tax lawyers at JDKatz: Attorneys at Law if you are worried about unreported foreign accounts. We keep a strict confidentiality with all of our clients and do our best to guide you in the right direction for your specific case. Call us today!