Let’s Talk Taxes – Overseas Voluntary Disclosure Program
LET’S TALK TAXES – Overseas Voluntary Disclosure Program(Asha Dixit, CPA, MBA, MS is a partner with Shah, Dixit & Associates P.C. in Burlington, MA. For further information, contact Ms. Dixit at email@example.com. )
“My goal all along was to get people back in the US tax system. Not only are we bringing people back into the US tax system, we are bringing revenue into the US Treasury and turning the tide against offshore tax evasion.”
“IRS Shows Continued Progress on International Tax Evasion”, September 15, 2011, IRS Ex-Commissioner Doug Shulman
US taxpayers are required to include all foreign income on their US income tax returns and pay related taxes. The IRS has strongly encouraged people with undisclosed foreign income to participate in the Overseas Voluntary Disclosure Programs. Such programs typically offer reduced penalties to participants.
The previous two programs, the 2009 Overseas Voluntary Disclosure Program (OVDP) and the 2011 Overseas Voluntary Disclosure Initiative (OVDI) that ended October 15, 2009 and September 9, 2011 respectively, had over 33,000 voluntary disclosures. So far the IRS has collected over $5 billion in back taxes, interest, and penalties.
In January 2012, a new disclosure program, the 2012 OVDP was started giving taxpayers yet another opportunity to participate in a reduced penalty program. However, the “FBAR-penalty” or “offshore penalty” has been increasing gradually from one program to the next. The original 2009 OVDP had a 20% penalty, while the 2011 had a penalty of 25%. The current OVDP increased the penalty to 27.5%. The 5% and 12.5% reduced penalty categories still remain.
Unlike the previous programs, the 2012 OVDP has no deadline for taxpayers to apply. However, per IRS FAQ #1, “the terms of the programs could change at any time going forward. For example, the IRS may increase penalties or limit eligibility in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point. “
Though most US persons are eligible to take advantage of this OVDP, FAQ #21 clearly states situations under which taxpayers will not be eligible to participate in this program. Individuals that may fall within the ineligibility requirements of FAQ #21 should apply to make a voluntary disclosure as soon as possible.
US taxpayers with undisclosed foreign income and assets should give serious consideration and understand the pros and cons of participating in the voluntary disclosure program. The IRS scrutiny of foreign assets and income is likely to continue, and so US taxpayers should fully understand their obligations.
Disclaimer: Every individual’s tax situation is
different and tax situations change over time. This article is intended to give
general information to enable the reader to discuss their situation with a tax
adviser. It is not intended to be tax or
legal advice and should not be construed as such.
You may also access this article through our web-site http://www.lokvani.com/