2012 IRS Offshore Voluntary Disclosure Initiative (OVDI)
The Internal Revenue Service (IRS) announced the idefinite continuation of an IRS amnesty program called 2012 Offshore Voluntary Disclosure Initiative (OVDI).
The program is available for taxpayers with unreported foreign financial accounts, entities, or income.
The OVDI limits the potential penalties associated with the failure to disclose foreign accounts, assets, and foreign income. The 2012 OVDI limits taxpayers with undisclosed offshore accounts and assets exposure to civil penalties.
If you do not participate in the OVDI program and are discovered with unreported foreign bank accounts, unreported foreign income, and certain undisclosed foreign assets you will be subject to criminal prosecution and the following extremely harsh penalties:
- Failure to report a foreign account. This penalty is the greater of $100,000 or 50 percent of the total balance of a foreign account for each year held.
- A fraud penalty equal to 75 percent of any unpaid tax
- Penalties for the failure to file information returns.
Individuals with undisclosed foreign income and accounts face the possibility of criminal prosecution. Taxpayers who want to significantly limit their exposure to criminal prosecution and overwhelmingly burdensome penalties must act fast.
Foreign Bank Accounts
Offshore Banking is currently under great scrutiny by the United States Department of Justice (the “DOJ”) and the IRS.
Offshore bank accounts and offshore income require special IRS and Department of Treasury reporting. Owning an offshore account is not illegal but taxpayers are required to declare and report any offshore bank accounts and income each year with their tax returns.
The Foreign Bank Account Report (the “FBAR”) is used to report a taxpayer’s financial interest in or authority over offshore accounts in a foreign country.
The willful failure to disclose offshore accounts, or to report all of the information required on an FBAR, can result in severe civil and criminal penalties.
The Pappas Group has handled dozens of voluntary disclosure/amnesty filings and is experienced in assisting and representing clients with all of the reporting and tax implications of offshore banking.