New OVDP Guide for the End of OVDP (Procedures, Warnings & Tips)
New OVDP Guide for the End of OVDP (Procedures, Warnings & Tips)
With OVDP ending on September 28 2018, time is running out for individuals who are seeking to make a submission to the traditional Offshore Voluntary Disclosure Program (OVDP).
Advertising is at an all-time high, with inexperienced attorneys and scare-mongers doing their best to goad you into OVDP by offering a “Free” telephone consultation, and telling you to quickly rush into OVDP before the IRS catches you, imprisons you forever, and takes all the money you have now, or will ever have again in the future.
Don’t Be Fooled; They are Just Scare Tactics
At Golding & Golding, we are a Board Certified Tax Law Specialist Law Firm and we specialize in IRS Voluntary Disclosure (which includes OVDP).
Please do not worry (too much). We are providing you with a list of procedures, warnings, and tips in moving forward with OVDP.
OVDP is Ending; Here is What You Need to Know
The Time for “Preclearance” Has Ended (For Now)
August 24, 2018 was the last day to submit a pre-clearance letter. The IRS make this very clear on their website FAQ 11 of the sunset OVDP FAQ provisions. At the time of this post, the page has not been updated (last updated: 7/26/2018).
Therefore, you cannot make a preclearance letter submission any further (unless this changes in the future). The IRS may update this later, but as of now, preclearance is over.
No Preclearance, Now What?
Preclearance was essentially an introductory request for the IRS to evaluate your background, to confirm whether you are even in a position to apply to OVDP.
In more recent months, there have been a significantly increased amount of OVDP rejections. In speaking with IRS agents, we have learned that the main reason why applicants are being rejected is not because they are under criminal investigation or subject to audit.
Rather, it is simply because the IRS already has the person’s information — they just haven’t acted on it yet. You can thank FATCA for that.
If the IRS has your information, they no longer need you to voluntarily disclosure; it is just that simple.
Since the time for preclearance is over, you no longer have the ability to submit to OVDP preclearance, and instead have to make a direct submission to phase one (1) of the program — which means turning over a significant amount of information without knowing whether the application will be accepted.
The Last Date to Submit is 9.28.18
The IRS will close the 2014 OVDP effective September 28, 2018. The FAQs for the 2014 OVDP provided that the program may close stating: “[T]he terms of this program could change at any time going forward. For example, the IRS may increase penalties or limit eligibility in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.”
Make Sure the Submission is Complete
Complete offshore voluntary disclosures conforming to the requirements of 2014 OVDP FAQ 24 must be received or postmarked by September 28, 2018 and may not be partial, incomplete, or placeholder submissions.
Practitioners and taxpayers must ensure complete submissions by the deadline to request to participate in the 2014 OVDP.
What Forms You Will Have to Submit?
Depending on the facts and circumstances of your case, there are various forms you may have to submit to the IRS upon acceptance.
They typically include (each link takes you to a different Golding & Golding summary):
- Foreign Mutual Funds
- Foreign Life Insurance
- Foreign Real Estate Income
- Foreign Real Estate SalesSubpart F Income
- Foreign Inheritance
- Foreign Pension
- Form 3520
- Form 5471
- Form 8621
- Form 8865
- Form 8938 (FATCA)
Prepare for Possible OVDP Rejection
Your OVDP may be rejected. If it is, you should have a strategy in place with your counsel, so that you are prepared to move forward following the rejection, knowing the IRS already has your information.
This is why you need experienced counsel.
You Have Other Options (Even If You Are Willful)
Yes, the IRS is ending OVDP and as of now has indicated that they will not be re-upping the program. But the IRS has also said that they will provide some additional instructions at the end of the program.
In addition, the IRS has had a traditional voluntary disclosure program on the books for many years, and as of now it will remain in place, post-OVDP.
And, if you were non-willful, you may still qualify for Streamlined or Reasonable Cause.
The reality is that the penalties for noncompliance for foreign accounts can be severe. And, even without preclearance, OVDP is usually a great option if you qualify.
You Can Still Opt Out
The OVDP Opt-out is an approved method for trying to obtain a reduced OVDP Penalty if you are already within the IRS Offshore Voluntary Disclosure Program (especially if you do not qualify for Transitional Treatment).
Despite the fact that the IRS will not negotiate the value of the penalty, if you decide to Opt-Out of the traditional OVDP Penalty Structure — you may be able to significantly reduce the IRS OVDP Penalty.
IRS OVDP Opt-Out Procedures for FBAR and/or FATCA Form 8938 Penalties can be a risky proposition – but for some people “Opting-Out” of the established OVDP penalty structure is the only way to get a fair penalty issued.
What to look for in an OVDP Attorney
Tax law is hard, and OVDP is very hard. There is No Such Thing as a “Tax Expert.”
As one of less 400 Board certified Tax Law Specialists in CA (out of more than 200,000 practicing attorneys) we have yet to meet another single Board Certified Tax Law Specialist who ever referred to himself or herself as an expert. (And for the record, being “Board Certified” is literally the highest tax designation you can earn as a Tax Attorney.)
Essential OVDP Attorney Credentials
– The Attorney should have around 20 years of attorney experience (OVDP, Litigation, Criminal, and Eggshell Audit/Reverse Eggshell Audit experience).
– Voluntary Disclosure must be the primary area of law that the firm handles. Otherwise, it is impossible for the attorney to know the necessary nuances and pitfalls of OVDP. If their website lists 10 other types of tax law and/or indicates areas of practice outside of tax law, then they do not specialize in OVDP and you should select a different firm.
– Make sure the attorney is either a CPA or EA, and has achieved a Masters in Tax Law (LL.M.). You will find the most experienced attorneys in this area have at least a Master’s in Tax Law and either the CPA or EA designation
– Ideally, you would have a Board-Certified Tax Law Specialist Attorney representing you.
Interview Your Attorney Handling the OVDP
A random published article or two does not make a person an experienced OVDP Attorney. You must speak with the Attorney handling your case.
Here’s a quick example: We update our website content relatively consistently and realize many other attorneys “borrow” our blog content and try to claim it as their own when selling a client. We know this, because clients tell us.
Recently, we spoke with a client who had previously retained another attorney who had been rejected from OVDP. The attorney is “a self proclaimed (not Board Certified) International Tax/OVDP Specialist” The Attorney never followed up with the department to ascertain why the OVDP was rejected.
The client thought it was somewhat amusing (if not fearful) when he realized that during a meeting with the attorney, that the attorney’s notes were just print-outs of our blog posts.
The client contacted us out of concern that their attorney was not as experienced as he claimed to be (despite having an OVDP article or two published), and told us the attorney’s plan was, drumroll please, “To submit to OVDP anyway, and “hope for the best.”
That is like asking a girl out on a date, and she says no…but you show up anyway?
No only is that “a bad plan,” (tax or non-tax related) but it is irresponsible and unethical to submit all of the client’s confidential information to the IRS after the IRS has already acknowledged that the person does not qualify for the program.
Two important Questions to Ask Your Attorney
- How Many OVDP (not Streamlined) cases have you handled in the last 5 years?
- How many Opt-Outs have you successfully handled?
Golding & Golding Specializes in OVDP
We have successfully handled a diverse range of OVDP cases. Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.
Who Decides to Go OVDP
All different types of people submit to OVDP. We represent Attorneys, CPAs, Doctors, Investors, Engineers, Business Owners, Entrepreneurs, Professors, Athletes, Actors, Entry-Level staff, Students, and more.
You are not alone, and you are not the only one to find himself or herself in this situation.
Some of the more common examples include:
- Individuals who knowingly did not report their foreign accounts;
- Individuals who did not tell their CPA about their foreign accounts;
- Individuals or businesses that stash income overseas;
- Individuals who knowingly did not file a requisite FBAR or 8938; or
- Individuals or Foreign Businesses that are otherwise out of compliance
Take a Deep Breath; You are Not Alone
Just be sure to properly vet out whichever counsel you choose, make sure you are confident with your selection, and you will be fine.