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We represent clients nationwide and in over 50 countries from our state-of-the-art offices in Irvine, California. We have successfully represented hundreds of clients annually with as little as $50,000 of unreported money, all the way up to over $35,000,000 in a single disclosure.
What is OVDP?
OVDP is the Offshore Voluntary Disclosure Program. It is a program designed by the U.S. Government to assist individuals and businesses that have not met their foreign account and offshore income reporting requirements to get into compliance.
If you are considering OVDP, there are a few facts you should know.
OVDP is an IRS Program
OVDP is a program that was designed and authorized by the U.S. government. As such, by entering into OVDP, you will be getting into compliance with U.S. tax law.
OVDP is Usually for People who are Willful
OVDP is a program that was designed for individuals who were willful. Even though the IRS does not provide a concrete definition of the term willful, it generally means individuals and/or businesses that knew they had a reporting requirement but did not report their foreign accounts or offshore/foreign income to the United States. (There are a few instances where a non-willful person may still want to file OVDP instead of the Streamlined Program.)
You May Not Owe Any Taxes
Depending on which country you reside in and whether or not you pay foreign taxes, you may not have any tax liability under the program. That is because you are generally entitled to a foreign tax credit – a credit for taxes you paid in a foreign country. This credit is then applied to any U.S. tax liability you may have.
Here’s a very basic example: Stephen earns $100,000 in investment income from Japan. The Japan Financial Institution already withheld 20.3% in taxes before distributing the interest income. Even though Stephen will have to report the income on his US tax return, he will get a credit for the $20,300 already paid in Japan.
If You were Non-Willful, You May Not Need OVDP
In recent years, the United States has expanded a small part of traditional OVDP called Streamlined Filing Compliance Procedures (Streamlined Program). The IRS created this temporary program in order to make it easier for individuals who were not willful to get into compliance.
If you qualify for the Streamlined Program, the penalty has been reduced all the way down to 5%. And, if you reside in a foreign country and meet the foreign resident requirement, your entire penalty may be waived and you may not owe any penalty at all.
Therefore, there is a possibility that not only will you have no tax liability, but you also may have no penalty due to the IRS. Zero taxes and zero penalty – it doesn’t get any better than that.
**Tax Law is a specialized area of law, and Offshore Disclosure is especially complex. Your OVDP or Streamlined Attorney should have:
- At least 15 years of experience as a practicing lawyer
- An advanced Master’s of Tax Law Degree (LL.M.); and
- Either a CPA or Enrolled Agent (EA) license.
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