Offshore Voluntary Disclosure Program (IRS Summary 2020)
Offshore Voluntary Disclosure Program: The Offshore Voluntary Disclosure Program was launched back in 2009 by the IRS. Back in 2009, it was referred to as the Offshore Voluntary Disclosure Initiative), but was later changed to Offshore Voluntary Disclosure Program . The idea behind the program, was that in 2008, the IRS began aggressively enforcing foreign accounts compliance. The U.S. forced several Foreign Financial Institutions (FFIs) into deferred prosecution agreements to avoid suffering an even worse fate at the hands of the U.S. Government.
Offshore Voluntary Disclosure Program
Applying to the Offshore Voluntary Disclosure Program has become more complicated. Before 2009, there was (and still is) the traditional Voluntary Disclosure Program (VDP). During the time of the Offshore Voluntary Disclosure Program, the VDP was primarily limited to domestic related issues, such as employment tax, sales tax, and general tax fraud. With the closing of Offshore Voluntary Disclosure in 2018, came the expansion of the traditional voluntary disclosure program. The expansion worked to integrate the spirit of OVDP into the traditional voluntary disclosure program.
On matters involving offshore voluntary disclosure, the submission process resembles the submission process as it was under the Offshore Voluntary Disclosure Program, but with several new updates.
We will summarize the major changes for you:
No Longer a Separate Offshore Program
The revised and updated voluntary disclosure program combines both the domestic and offshore into one program. Under either the Offshore Voluntary Disclosure or Streamlined procedure, a person (which includes more than just “individuals”) may submit domestic and foreign income in a single submission.
The Preclearance Letter is Now an IRS Form (Rev. Form 14457)
Under the previous Offshore Voluntary Disclosure Program, a person could submit to the program without submitting a preclearance letter first. In some instances, this was a good strategy. But, with the updated procedures, a preclearance letter is submitted — and on a standardized Form 14457— the Form was revised in 3/2019.
Less Tax Returns Are Necessary to be Filed or Amended
Unlike OVDP in which 8-years of tax returns were required to be filed, under the revised program only 6-years of amended (or original) tax returns are required.
Less FBARs are Filed or Amended as well
To coincide with the FBAR Statute of Limitations — which is 6-years — the new updated OVDP only requires 6-years of FBARs instead of 8-years.
Possible Waiver of International Information Return Penalties
Under the revised program, the IRS may take mercy on issues involving information returns. Especially in light of the gargantuan sized penalties that may accompany the non-filing of IRS forms 3520 and 5471, this is a welcome change. (of course, the key word is may). Depending on the specific facts and circumstances surrounding the submission, the IRS may determine that no penalty applies for international information returns. It all depends on the specific facts of the applicant (overall, this will be a good-thing for taxpayers).
Revised Penalty Computation For FBAR
Under the tOVDP Offshore Voluntary Disclosure Program, there was a single-penalty issued for the assets and accounts. It was typically 27.5%, unless there was a bad bank involved, in which the entire penalty could jump up to 50% With the revised procedures, FBAR penalties will simply follow the IRM. The IRM is the Internal Revenue Manual. The FBAR penalty under the new OVDP Voluntary Disclosure is a baseline of 50% minimum value of $100,000 — whichever is greater, but the penalties may be mitigated.
Revised Penalties on Taxes Due Computation
The new offshore voluntary disclosure program procedures revised the penalties on taxes due as well. Under the prior version of the offshore program, the IRS penalty on taxes was 20% per year, on taxes due. Under the updated version of OVDP Voluntary Disclosure, there is a single 75% penalty on the highest year taxes due, BUT, the taxpayer can seek to try to reduce the penalty.
No Formal Opt-Out Procedure (Yet)
This is the part of the revised procedures that may make some applicants who prefer strict structure, a bit more squeamish. Under the prior OVDP, the penalty was either 27.5% or 50% (if a bad bank was involved). Once the penalty was paid and the 906 signed, that was essentially the end of it. Under the new version of the program, the IRS may be able to audit the taxpayer, but there is no formal “opt-out.” This may be a benefit to taxpayers who may want to fight the penalty, without formally opting-out.
*These rules are subject to change,
As Always, Beware of Overzealous Claims and False Marketing
We have helped 1000s of clients nationwide and in over 75+ different countries. Our Offshore Specialist team is passionate about bringing clients into compliance. We want to help you understand the basics of these programs without being misled by inexperienced counsel, or being sold a false bill of goods from attorneys who are not dually-licensed in Law and Tax, and who intentionally misapply the principles of Kovel, and attorney-client confidentiality. Each case is led by a Board-Certified Tax law Specialist.
Golding & Golding
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the Enrolled Agent credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.