OVDP Lawyers – Certified Tax Law Specialist, We Specialize in OVDP
The OVDP Lawyers at Golding & Golding represent clients nationwide and worldwide in over 60 countries with all aspects of the IRS Offshore Voluntary Disclosure Program.
We are the only State Bar Board Certified Tax Law Firm that specializes exclusively in IRS Offshore Voluntary Disclosure, including OVDP and Streamlined Disclosures.
Sean M. Golding, JD, LL.M., EA (Certified Tax Specialist)
Anyone can say they “specialize” in tax, but only few are State Bar Certified Tax Law Specialists.
Sean M. Golding is one of less than 400 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.
The exam is widely regarded as one of (if not) the hardest tax exam given in the United States for practicing Attorneys.
Sean has accumulated nearly 20 years of legal experience. He holds a Master’s of Tax Law from University of Denver and is also an Enrolled Agent, the highest credential awarded by the IRS (which authorizes him to represent clients before the IRS in all 50 states).
OVDP Lawyers – Golding & Golding
Common questions our Attorneys answer on a daily basis involve issues such as (each link below is to a comprehensive article prepared by Golding & Golding):
- OVDP vs. Streamlined
- Willful vs. Non-Willful
- OVDP FAQs
- OVDP Penalty Calculations
- OVDP Opt-Out
- FBAR Penalties
- International Criminal Tax Investigations
While we are often called upon by clients, other Attorneys, CPAs, Accountants and even IRS Personnel to handle (or takeover) highly complex OVDP matters, we also represent clients in more “simple” matters.
Our goal is to bring peace-of-mind to any client seeking to safely get into compliance. And in reality, no OVDP case is “simple.”
OVDP Ends on September 28, 2018
With the IRS Announcement that OVDP is ending on September 28, 2018, there has been an influx of inexperienced OVDP Attorneys marketing themselves online as IRS Offshore Voluntary Disclosure Lawyers.
They are all too ready to take your hard earned money, and leave you out to dry. These Attorneys have no OVDP experience, and have probably handled a few Streamlined Cases as part of their general tax practice.
They have never handled a trial, never litigated a case on their own, and never represented a client during an OVDP Opt-Out.
OVDP is a Specialized Area of Law
IRS Offshore Voluntary Disclosure is ALL we do. While our lead partner, Mr. Golding has been practicing for more than 18 years as an attorney, and has extensive experience in complex, high-stakes Eggshell Audits, Reverse Eggshell Audits, Criminal and Civil Litigation, we limit our practice exclusively to IRS Offshore Voluntary Disclosure.
We have successfully handled several hundred OVDP and Streamlined Disclosure cases.
Our Clients Have Asked Us, to Warn You!
About 15% of our clients come to us after first having went to a less qualified OVDP lawyer first, that baited them in with artificially low fees.
Our clients have told us over and over again, that they wish they had known these issues prior to retaining their initial attorney.
We want to help.
1. Research OVDP Before Contacting an Attorney
Spend lots of time reading quality articles (if you have the time) from our firm and other firms that specialize in OVDP. Avoid fear-mongering sites and general tax practitioners. We have several free resources available on our site, which you can find on our FAQ page.
You should read as many of these articles as you can, so you can get a solid understanding of the OVDP ‘program’ and the submission process.
2. Check if Your Attorney has Advanced Tax Credentials
Ideally, the Attorney handling your case will be a State Bar Certified Tax Lawyer. Mr. Sean M. Golding is one of less than 400 attorneys (of more than 200,000 actively practicing attorneys in California) that is State Bar Certified, and the only State Bar Certified Attorney who focuses exclusively in IRS Offshore Voluntary Disclosure law.
International tax law, and especially offshore voluntary disclosure is very complex. There are many components to an offshore disclosure, including the tax aspect, the accounting aspect, the legal aspect, and the potential audit or litigation aspect.
Nearly all the top attorneys in this field who focus exclusively on International Tax, and who handle OVDP regularly, have an advanced Tax Law Degree (LL.M.) and hold either a CPA or EA designation.
If an attorney is an experienced attorney practicing in this field, it is almost a prerequisite to have both an advanced degree such as an LL.M (which is a Master’s of Tax Law) and either a CPA designation or Enrolled Agent (“EA”) designation (an EA is the Highest Credential awarded by the IRS).
What is an IRS Enrolled Agent (EA)?
An Enrolled Agent (EA) is the highest tax credential awarded by the IRS.
*The EA exam is very difficult, which is why the credential is not well-known. It requires a person to pass three (3) different exams (Individual Tax, Business Tax, and Ethics) during three different sessions on three different days, as well as take more than 72 hours of Continuing Education over 3-years.
Many Attorneys have tried taking the EA exam, but failed the exam due to the fact that they just do not have the tax knowledge necessary to pass all three (3) portions.
Why Use an Attorney with an EA and LL.M. (Masters in Tax)?
It takes this type of Legal and Tax background to be able to properly vet out your case. If your attorney does not have this experience, then who is properly evaluating your case? Sure, they may tell you your case seems easy — but that is because they do not know any better. It’s just not worth the risk.
Click here for a case study example of what happens when you retain inexperienced counsel in OVDP.
3. Interview Both the Attorney & CPA/EA if the Attorney is Not a CPA or EA
This is not the time to be bashful.
OVDP is a complex and comprehensive undertaking. Ask the Attorney for specifics, such as:
- The number of OVDP cases they have handled on their own;
- Whether or not they have ever handled an OVDP Opt-Out; and
- Multiple examples of penalty reductions, PFIC Elections, and other penalty reduction strategies they have used in the past.
Ask them the hard questions during the interview, and if they stumble or falter during their explanations, move onto the next Attorney.
4. Opt-Out Experience is Important
Usually, you do not know if you are going to opt-out until the end of the OVDP process — which is not the time to learn your Attorney has about as much experience with OVDP that you do.
We are one of the only firms that has successfully represented clients in OVDP Opt-outs, and at times have reduced the OVDP penalty to below what the Streamlined Penalty would have been.
Click Here for a recent OVDP Opt-Out, in which we were substituted into the case as counsel after one of these unqualified firms baited the clients with artificially low fees and put the clients into serious financial jeopardy. We successfully reduced an OVDP penalty by 85% and achieved a lower penalty than the client would have received under the Streamlined Program.
Then…Watch Out For OVDP Scams
Once you have vetted out the case, beware of these common OVDP Scams:
The Attorney Fees are Artificially Deflated
In order to properly complete an OVDP or Streamlined Application, it takes time. And time, cost money. Yes, you can go to a junior attorney and pay a significantly reduced fee, or a very senior attorney with no real interest in your case — but you typically get what you pay for.
In these types of situations, the client normally comes to us after having paid an artificially low fee to an inexperienced attorney, and realizes the following:
- The Attorney selected the least expensive CPA they could find to handle the tax returns;
- The CPA did not seem to understand the tax laws of the particular country; and
- The Attorney has “no idea” about how the tax returns were prepared.
The Attorney Used to Work for the IRS…
This is another one of those sales pitches to be cautious of.
Working in the Offshore Disclosure Department of the IRS as a Senior Attorney or as an IRS Trial Attorney may be valuable experience. Anything less is just smoke and mirrors being used to divert you from the fact that the Attorney lacks OVDP Attorney experience.
The OVDP department of the IRS has its own set of rules, policies and procedures – it operates much differently than the rest of the IRS.
You need an Attorney experienced in OVDP.
The Attorney Has No Litigation Experience Representing Their Own Clients
While we are not fans of litigating unless necessary, our Attorneys have litigated highly complex cases. Mr. Golding has represented thousands of clients in many complex cases throughout his nearly 20-year law career. He has successfully avoided criminal prosecution for clients in Tax, Business and Corporate matters.
Mr. Golding has represented clients facing prosecution, and on many occasions facilitated all charges being dropped. We have also handled many complex Audits, including Eggshell audits and Reverse Eggshell Audits, without a single client being referred to prosecution.
This experience helps up to best represent our clients. Without experience litigating on behalf of their own clients in court, many newer attorneys or attorneys without any litigation experience are lost (along with you) when the IRS decides to push back.
Are They Selling You on Streamlined, When You Were Willful?
The IRS is clear: If you were willful at all, then you cannot qualify for the IRS Streamlined Program. There are no exceptions for people who were only willful for a year or two, and no exceptions for people who only failed to report “small” amounts of income. We find it reprehensible that there are other attorneys intentionally putting potential clients in serious financial risk, as well as harm’s way for a potential IRS Criminal Investigation, by pushing them into Streamlined when they know the client was willful.
Once you submit to the Streamlined Program, you can not thereafter submit to OVDP.
If a person is willful, they do not qualify for Streamlined or Reasonable Cause. It doesn’t matter whether it was 1-year, 5-years or 10-years worth of non-compliance.
**While the extent of the willfulness penalties might be mitigated through an OVDP Opt-Out, you should never submit a reasonable cause letter or streamlined submission if you were willful. This is especially true, since the IRS has begun auditing Streamlined Submissions.
It is not their money or their freedom on the line – it is yours, so be careful…
We Take OVDP Representation Very Seriously
We are passionate about representing individuals in offshore voluntary disclosure matters, and feel horrible when a client calls us after having hired an inexperienced Attorney or CPA who either did a sloppy job, charged them more money than they agreed upon, and/or is overall not providing the level of representation a person deserves.
A Brief Summary of How OVDP Works
There are many aspects that go into any particular tax calculation, including the legal status, marital status, business status and residence status of the taxpayer.
OVDP is an acronym for Offshore Voluntary Disclosure Program. It is the traditional Internal Revenue Service program designed to bring individuals, estates, and businesses into Offshore and Foreign Compliance.
There are 4 main elements to OVDP:
In this summary, we will breakdown each element for you, to provide you a basic understanding of how the program works.
Offshore does not mean you should be conjuring up visions of resting easy in the Bahamas, or stashing millions in the Caymans. Essentially, from an international IRS tax perspective, it simply means you have money overseas. Whether the money is in a foreign account, overseas, or abroad — it is being held “offshore.”
Therefore, in order to qualify for OVDP you must have unreported assets, income or investments abroad. If you do have offshore assets, income or investments, then you can report them with OVDP — and you can include domestic undisclosed money as well.
But, it is important to keep in mind that you do not get the same protection for your domestic undisclosed money that you receive for your offshore undisclosed money. Moreover, if you do not have any undisclosed offshore money, and all of your unreported money is domestic (located in the United States), you can submit to the IRS Domestic Voluntary Disclosure Program, but not OVDP.
Unfortunately, the IRS Domestic Voluntary Disclosure Program does not provide the same protections and reduced penalty structure as the Offshore Voluntary Disclosure Program.
Voluntary means you are entering the program on your own volition.
Usually, it means that you are not under audit or under examination with the IRS. That is because if you are already under IRS audit or examination and then submit to the program, you are not technically doing so voluntarily. Rather, you are entering the program in response to being audited or examined.
The reason the IRS does not allow you to enter OVDP once you are under audit is because you have a proactive responsibility during an audit or examination to bring these issues to the forefront and explain them to the auditor — even if the auditor did not ask about offshore accounts specifically – but assuming he or she asks about additional income, assets, etc.
When you are under audit or examination you can be subject to excessively high fines and penalties which are mitigated through traditional OVDP. The IRS will not let you out of those penalties (if you are audited) by submitting to OVDP at that time.
By disclosure, the IRS is referring to full disclosure. If you want to voluntarily disclose offshore money, then you have to do a full disclosure and report all of the information you have regarding all of your offshore money abroad.
It does not matter if the money was held in an account within a branch or institution that went out of business. It also does not matter that your money is being held in an anonymous account that you firmly and wholeheartedly believe can never be discovered.
Rather, from the IRS’ perspective, when it is time to disclose – you must perform a full disclosure and report all of the information — no matter how low the chances that the IRS could ever discover the information, account information, investments or income otherwise.
OVDP is an approved IRS program. There are specific time requirements and reporting disclosures that must be done according to OVDP milestones. If you fail to meet these milestones timely, the IRS can remove you from the program, which now means the IRS has at least some specific information regarding your offshore finances, and can now enforce incredibly high fines and penalties against you.
Worse yet, you no longer have the protection of OVDP.
How Does an OVDP Case Work?
OVDP Phase 1
The person submits a preclearance letter. It typically takes the IRS 30 to 45 days to respond to the letter. After around 45 day you will learn whether you have been accepted or rejected into OVDP. Despite what some inexperienced attorneys will tell you online, not everyone gets accepted. And if an attorney has told you that everyone always gets accepted, than they have not been practicing in this area of law long enough – especially with the introduction of FATCA.
OVDP Phase 2
The applicant has 45 days to submit the initial disclosure to the IRS. It is a relatively detailed breakdown of the different accounts, transfers, opening and closing of the accounts, and related information. It is not as detailed as preparing and submitting IRS forms and schedules such as general FATCA Reporting, FBAR, 3520, 5471, 8621, 8865, 8938 — but it is still relatively comprehensive, and more detailed than it had been in years past, especially pre-FATCA.
OVDP Phase 3
Presuming that the applicant is accepted, the applicant then has 90 days to submit the full disclosure, including all necessary FBARs, schedules, penalty competitions, legal arguments for mitigation of penalties, etc. Depending on the specific facts and circumstances of your case (numerous PFICs, Foreign Mutual Funds, ETFs, etc.), it may take longer for you to compile the information or prepare the necessary documents. The IRS routinely grants extensions to file.
We know…it seems nuts to acquiesce to the IRS before they have even found you, audited you, or examined you — and allow the IRS to issue penalties against. You may instead also consider submitting an IRS Quiet Disclosure in hopes that you can fly below the radar without getting caught.
Quiet Disclosure is a horrible idea, and here’s why:
First, a quiet disclosure may lead you to jail or prison. For a comprehensive case study on how IRS required disclosure of offshore money can go wrong, please refer to our prior blog page on Quiet Disclosure, Criminal Investigations & Prison.
Second, if the IRS audits or examines you before you enter the program, you may be subject to incredibly high fines and penalties, which are detailed below:
The reason why it is so important to disclose before the IRS finds you, is because the IRS has taken to issuing gargantuan penalties against individuals whose issues seem relatively minor (Read: is the world going to explode because Marty didn’t report his foreign account?)
When it comes to penalties, the IRS has extreme leeway. On the one hand, if a person can show reasonable cause, then often times penalties will be waived. On the other hand, the IRS has the right to issue penalties which can reach 100% value of the foreign account in a multi-year audit scenario (noting, that up until recently the IRS issued 300% penalties for unreported FBARs, when a person was found to be willful and penalized at 50% within the 6-year SOL).
The following is a summary of penalties as published by the IRS:
A penalty for failing to file FBARs. United States citizens, residents and certain other persons must annually report their direct or indirect financial interest in, or signature authority (or other authority that is comparable to signature authority) over, a financial account that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the year. The civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign financial account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.
Beginning with the 2011 tax year, a penalty for failing to file Form 8938 reporting the taxpayer’s interest in certain foreign financial assets, including financial accounts, certain foreign securities, and interests in foreign entities, as required by IRC § 6038D. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
A penalty for failing to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Taxpayers must also report various transactions involving foreign trusts, including creation of a foreign trust by a United States person, transfers of property from a United States person to a foreign trust and receipt of distributions from foreign trusts under IRC § 6048. This return also reports the receipt of gifts from foreign entities under IRC § 6039F. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.
A penalty for failing to file Form 3520-A, Information Return of Foreign Trust With a U.S. Owner. Taxpayers must also report ownership interests in foreign trusts, by United States persons with various interests in and powers over those trusts under IRC § 6048(b). The penalty for failing to file each one of these information returns or for filing an incomplete return, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.
A penalty for failing to file Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations. Certain United States persons who are officers, directors or shareholders in certain foreign corporations (including International Business Corporations) are required to report information under IRC §§ 6035, 6038 and 6046. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
A penalty for failing to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Taxpayers may be required to report transactions between a 25 percent foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the United States and a related party as required by IRC §§ 6038A and 6038C. The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.
A penalty for failing to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. Taxpayers are required to report transfers of property to foreign corporations and other information under IRC § 6038B. The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.
A penalty for failing to file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. United States persons with certain interests in foreign partnerships use this form to report interests in and transactions of the foreign partnerships, transfers of property to the foreign partnerships, and acquisitions, dispositions and changes in foreign partnership interests under IRC §§ 6038, 6038B, and 6046A. Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.
Underpayment & Fraud Penalties
Fraud penalties imposed under IRC §§ 6651(f) or 6663. Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.
A penalty for failing to file a tax return imposed under IRC § 6651(a)(1). Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.
A penalty for failing to pay the amount of tax shown on the return under IRC § 6651(a)(2). If a taxpayer fails to pay the amount of tax shown on the return, he or she may be liable for a penalty of .5 percent of the amount of tax shown on the return, plus an additional .5 percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding 25 percent.
An accuracy-related penalty on underpayments imposed under IRC § 6662. Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty.
Even Criminal Charges are Possible…
Possible criminal charges related to tax matters include tax evasion (IRC § 7201), filing a false return (IRC § 7206(1)) and failure to file an income tax return (IRC § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322. Additional possible criminal charges include conspiracy to defraud the government with respect to claims (18 U.S.C. § 286) and conspiracy to commit offense or to defraud the United States (18 U.S.C. § 371).
A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000. A person convicted of conspiracy to defraud the government with respect to claims is subject to a prison term of up to not more than 10 years or a fine of up to $250,000. A person convicted of conspiracy to commit offense or to defraud the United States is subject to a prison term of not more than five years and a fine of up to $250,000.