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14 Requirements for Participation in the OVDP

Posted in Offshore Account Update on March 11, 2016 | Share

Everyone who is a U.S. citizen with an offshore bank account has to file an annual Report of Foreign Bank and Financial Accounts (FBAR). Even if you live abroad, you have to file this report. If you don't file FBARs, you can face penalties.

Those penalties could include prosecution and very substantial fines if the IRS discovers the account on its own and begins to take action. With many offshore banks providing information to the government, many offshore accounts are being discovered.

You can limit the consequences and reduce penalties of failure to file FBARs if you participate in the Offshore Voluntary Disclosure Program (OVDP).  This is an amnesty program for people who voluntarily alert the IRS to their past failures to report foreign accounts. There are strict requirements for OVDP participation and a Washington DC tax law attorney should be consulted to help you determine if those requirements can be met and if OVDP participation is a smart choice for you.

A CLOSER LOOK AT THE REQUIREMENTS  

OVDP participation is chosen by many offshore accountholders because the financial consequences for voluntarily coming forward and reporting offshore accounts that you were previously supposed to declare can be far less than the financial penalties if the IRS discovers your account on its own. 

To be eligible for OVDP, you must meet many specific requirements, including these 14 prerequisites for participation:

  • You have to certify that your failure to file FBARs on offshore accounts was not a willful failure.
  • You must provide copies of your tax returns for all the years in which you're admitting you should have filed FBARs but didn't.
  • You'll have to provide completed federal tax returns for all the years for which you're making voluntary disclosures. The returns should be amended and offer details on any income previously unreported.
  • You'll have to provide copies of completed and signed Offshore Voluntary Disclosure letters.
  • You must complete and sign an agreement to extend the time period in which taxes can be assessed and FBAR penalties can be assessed.
  • You must provide copies of any FBARs you have filed.
  • You are required to provide financial account statements showing detailed account activity for all tax years for which you are making a voluntary disclosure of undeclared accounts.
  • You must provide a statement detailing all of the foreign entities that you directly or indirectly hold, if you are disclosing those foreign entities as part of your voluntary disclosure.
  • You must complete returns that are required based on the foreign entities being disclosed. This could include forms 3520, 3520-A and other relevant forms.
  • You must provide either gift tax returns or estate tax returns if there are issues related to either estate or gift taxes that are implicated by your disclosure.
  • You must agree to pay penalties calculated based on the full amount of underpaid taxes due to failure to report offshore accounts. Penalties are outlined in Code Section 6662(a) of the Internal Revenue Code.
  • You must pay penalties for failure to file, as outlined in IRC section 6651(a)(1), as well as penalties for failure to pay, as outlined in IRC section 6651(a)(2).
  • You will have to pay a miscellaneous penalty based on the highest aggregate value of offshore accounts during the period for which you're voluntarily disclosing those accounts. This miscellaneous penalty is explained in Title 26 of the Internal Revenue Code.
  • You must agree to cooperate with tax enforcement efforts spearheaded by the IRS and the Department of Justice. This could include providing info on offshore institutions that helped you keep the money a secret.

Kevin Thorn, a DC tax law attorney, can assist you in understanding and meeting the requirements, as well as offer advice on whether OVDP participation is right for you. Call for help as soon as possible to learn more.


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Hear What Our Clients Have To Say

"Mr. Thorn and the attorneys at Thorn Law Group were so knowledgeable about the IRS Voluntary Disclosure Program and about the way the IRS Criminal Investigation Division works. Mr. Thorn helped put my mind at ease and walked me through the whole Voluntary Disclosure process. With the help of Thorn Law Group, and Mr. Thorn specifically, we were able to get back into compliance and were able to avoid criminal prosecution."