On September 28, 2018, the federal government closed down the “Offshore Voluntary Disclosure Program,” which allowed taxpayers to remit back taxes and reporting requirements associated with overseas investments and funds. But fear not! If you’ve missed the deadline, lawmakers created a new program.
Voluntary Disclosure Program for Offshore Investments and Accounts: The Basics
Governing Law: The Bank Secrecy Act of 1970 requires U.S. taxpayers with signatory authority for offshore financial accounts worth more than $10,000 at any point during a given year, to report said account(s) to Uncle Sam. This must be done even if the funds aren’t taxable in the United States.
Potential Punishments: Traditionally, failure to comply resulted in hefty fines; egregious cases sometimes led to criminal prosecution.
OVDP Origins: To make things easier for both authorities and people who were unaware of the requirements, legislators implemented the Offshore Voluntary Disclosure Program, which allowed parties to come clean without risking criminal persecution. Typically, taxpayers who took advantage of the program paid between 10 and 27 percent in penalties.
OVDP’s End: The IRS explained that participation in the program dropped dramatically in 2017. As such, the agency decided to shutter the program on September 28, 2018. However, the agency will continue to accept applications for the Streamlined Filing Compliance, Delinquent FBAR Submission, and Delinquent International Information Return Submission programs, which are all available to taxpayers who non-willfully failed to meet compliance standards.
Help! I Need to Report: What if you didn’t know about the requirements and need to come clean? Don’t worry, you have options. The conditions aren’t as great as the OVDP, but you still have available routes, down which a tax law attorney can guide you.
Differences Between the Old OVDP and the New VDP
What are the differences between the OVDP and the new VDP? The new program looks strikingly similar to the old one, with three notable variances.
- Instead of a six-year disclosure period, participants will have to reveal eight years’ worth of records.
- Under the old program, authorities assessed a 20 percent “accuracy-related” fine to the full underpayment amount for all disclosure years. Under the new rules, a 75 percent civil penalty will be evaluated on the year with the highest tax liability.
- Before, participants usually paid about a 27.5 percent penalty on the highest aggregate balance for the disclosure period. That figure will rise to 50 percent under the new standards.
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