Offshore Net still Entangling Taxpayers: a Q & A on the OVDP
The IRS’s stepped-up enforcement campaign on offshore account disclosure has been going on for years now. Combined with the rollout of the Foreign Account Tax Compliance Act, it has put great pressure on taxpayers with offshore holding as well as foreign financial institutions.
Faced with possible criminal penalties, many taxpayers have chosen to participate in the IRS’s limited-amnesty program for offshore account disclosure. Yet in a recent case, a man was sentenced to jail time despite applying to participate in the program.
In this post, we will offer a Q & A on the program, in light of that case.
What do limited-amnesty programs do?
Limited-amnesty programs allow people with undisclosed foreign accounts to voluntarily tell the IRS about those accounts, and agree to cooperate, in exchange for an agreement that they won’t be subjected to criminal charges.
The programs also enable participating taxpayers to minimize civil fines and penalties.
How long has the IRS been offering such programs?
The IRS offered limited-time programs in 2009 and 2011. At one time, the program was called the Offshore Voluntary Disclosure Initiative (OVDI).
It is now called the Offshore Voluntary Disclosure Program (OVDP).
How many people have used the programs?
Tens of thousands of people have participated in limited-amnesty programs offered by the IRS for offshore account disclosure. The number of participants is more than 54,000. Cumulatively, these participants have paid a whopping $8 billion to resolve their taxes on foreign accounts. This figure includes not only back taxes, but also penalties and interest.
Is there a downside to participating in a limited-amnesty program?
It’s important to remember that avoiding prosecution requires more than merely applying for the program. It also requires cooperating fully with the IRS.
If you apply but don’t tell the IRS about all applicable accounts, you could dig yourself into even deeper trouble. That is what happened recently to a New York restaurant owner, who applied for the limited-amnesty program but then transferred money to another offshore account at a different bank.
The IRS found out about this and the man was eventually convicted was criminal tax evasion.
