Let’s review a few common OVDP commonly asked questions.
Why does the federal government need to know how much money I have in foreign accounts?
Before we get into the WHENs-and-WHATs of various foreign tax reporting requirements, let’s quickly talk about the why. Specifically: Why does Uncle Sam need to know your foreign bank account balances? Furthermore, what law gives feds the right to pry into overseas holdings?
In short, it all has to do with national security. International funds, theoretically, could present a threat. As such, lawmakers have passed various regulations that allow government agencies to track taxpayers’ international holdings.
What is the FBAR program?
FBAR stands for Foreign Bank Account Reporting. You may also know it as Fincen Form 114. By whichever name, it’s a mandatory disclosure to which all taxpayers with a cumulative $10,000 in overseas accounts must comply.
Who, exactly, must complete foreign financial reporting (FBAR) paperwork?
All U.S. taxpayers, whether living stateside or abroad, with an aggregate $10,000 across one or more international accounts, must submit the Fincen Form 114 annually.
What counts as a foreign account?
The rules regarding what is and isn’t considered a foreign account can be situation dependent. Checking and savings accounts, in addition to various money market and investment holdings almost always slot into the “foreign account” category for tax disclosure purposes. If, however, the bank of your overseas’ account has a U.S. branch, then disclosures aren’t necessary.
All in all, it’s always best to work with a tax law attorney when embarking down the FBAR or OVDP road. Why? Because we know all the ins-and-outs, not to mention the best ways to save you money while remaining on the right side of the law.
What is the Offshore Voluntary Disclosure Program?
FBAR regulations had been around for a long time, but few people seemed to know about them. So, starting in 2009, the IRS began offering taxpayers opportunities to voluntarily disclose unreported foreign financial accounts in exchange for reduced penalties.
Fair warning: The OVDP process is complicated, nuanced, and very time sensitive. In short, it’s a Herculean task of the legal variety, which is why the overwhelming majority of people who take advantage of the amnesty program do so with the guidance of a tax resolution attorney.
What does “non-willful” mean with regards to the streamlined Offshore Voluntary Disclosure option?
There are two OVDP tracks: streamlined and normal. To qualify for the streamlined option, filers must swear that their failure to previously report overseas accounts was “non-willful.” Which leads to the next question: What does “non-willful” mean? Essentially, it means that your disclosure delinquency was not intentional, but instead a result of:
- Negligence: Honestly was not aware of the requirement; or
- Inadvertence: Understandable, careless mistake on the part of a third-party tax preparer;
What is the penalty scale for people who opt to use the non-streamlined OVDP process?
The feds typically hit “normal track” OVDP taxpayers with a 27.5 to 50 percent penalty calculated off the highest aggregate balance over the reporting period.
What is the penalty scale for people who opt to use the streamlined OVDP process?
Taxpayers who qualify for the streamlined OVDP process can be as low as 0% and as high as 5% of the highest balance over the reportable time.
Be careful going for streamlined. The low penalties may seem attractive, but it may not be the best option. An OVDP lawyer can determine the best route for our exact situation.
Does the streamlined OVDP process automatically protect me from possible criminal charges?
No, it doesn’t. If, during the OVDP streamlined process, authorities uncover massive financial fraud, they can file charges. However, agents are more likely to give the benefit of the doubt to people who voluntarily come forward and are guided by an experienced tax attorney.
What could happen to me if I qualify for FBAR reporting but fail to take advantage of the OVDP?
If you have funds in overseas accounts and honestly did not know about FBAR requirements before now, the best thing to do is to get on a phone immediately with a tax law attorney; coming forward voluntarily is almost always the best option. But here’s the rub: Authorities are ending the OVDP program in a couple of months. They’re shutting it down. There will no longer be an FBAR amnesty program by year’s end.
I don’t have money in overseas accounts, but I haven’t paid taxes in many years. Can I used the OVDP amnesty program?
Unfortunately, no you can’t. OVDP is for international financial reporting only. However, you may be able to leverage other programs and options. Get in touch with us today. We’ve helped countless people with severe back tax issues. Better yet, we’ve saved them lots of money and can do the same for you.
Connect With An FBAR and OVDP Lawyer Today
Gordon Law Group has been working on international tax issues for years. Every lawyer on our team has experience in the niche, and we’ve guided countless clients through complex conflicts involving overseas holdings. We’re also a leading OVDP firm.
Get in touch today. The consultation is on us. Let’s talk about your options, getting compliant, and saving you money.Connect With An OVDP Tax Lawyer »