OVDP Lawyers (2018) – Offshore Voluntary Disclosure Program Representation
The OVDP Lawyers at Golding & Golding represent clients nationwide and worldwide in over 55 countries with all aspects of the IRS Offshore Voluntary Disclosure Program.
OVDP Lawyers – Golding & Golding
Golding & Golding is one of the few international tax law firms worldwide that focuses exclusively on representing clients in IRS OVDP.
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, and Accountants 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.
We Recommend Clients Take Action
Since we receive numerous referrals each year from clients who were tricked into retaining one of these firms first, we realize it is the same few firms. At best they are ignorant of the law, and at worst have committed ethical violations and malpractice. They rarely have more than 5-10 years of attorney experience, and little to no experience representing their own clients as an Attorney in private practice.
If you find yourself in this situation, contact us and let us know what happened — so we can try to assist you.
Offshore Disclosure is ALL We Do
Since Offshore Disclosure is all we do, we have spoken to literally thousands of clients over the years on issues involving offshore disclosure. We believe we are the most passionate and dedicated OVDP and Streamlined Lawyers in the marketplace.
We want to help you. Whether you hire our firm, or another experienced offshore disclosure firm, it is important to eliminate the inexperienced and unethical attorneys from your short-list before making a decision.
How do these Unethical Attorneys Operate?
They intentionally misrepresent how Offshore Disclosure works to potential clients in an attempt to undercut qualified OVDP Lawyers and make a quick buck. They intentionally downplay the potential penalties, pitfalls and landmines you may encounter — because they have no experience in representing clients in the trenches.
And, with OVDP set to terminate in less than 6 months (September 28, 2018), it is only gets worse.
In all reality, unless your OVDP Attorney has been practicing law as an Attorney for at least 15 years, has litigation and audit experience as an Attorney, and both an LL.M. (Master’s in Tax Law) and either an EA or CPA – they are not qualified to handle your OVDP or Streamlined Matter, no matter how “routine” they incorrectly believe it is.
Examples of Common Unethical OVDP Practices
Free Telephone Consultations – The “Scare and Sell”
We do not offer free consultations. Rather, we offer reduced-fee initial consultations designed to educate and inform. We never steer a willful person into Streamlined or vice versa (unless the non-willful person prefers to make an OVDP submission instead of Streamlined, for one any number of different reasons)
Nine out of 10 times, a Free Consultation is a sales call. Experienced Attorneys (in any industry) rarely offer initial consultations. The reason why is because it takes time to vet out a client’s facts and circumstances properly, and it can almost never be accomplished in a quick 10-20 minute rushed call.
The call is designed to sell you before you have the opportunity to speak with experienced counsel. And, what is the quickest way to sell you with offshore disclosure? It is by telling you that everyone goes Streamlined. They tell you your matter is “routine” and “low-risk,” and artificially reduce the fee. They misinform you that any attorney who recommends OVDP is trying to pad their pockets.
They tell you everything will be fine, and that the chance of audit is low.
And, while the chance of audit is low, for those who get selected and get caught cheating or lying to the IRS, they can face fines, penalties, and jail.
**We are currently representing clients who were sold into Streamlined when they were willful (and vice versa), and have been approached by many more (so no, you are not alone).
The Attorney Automatically Steers You Away From OVDP
For some people the Streamlined Program is a great program, but not for everyone – not by a long-shot. If an Attorney is not willing to go through the entire OVDP analysis with you, it is because:
- They do not have any experience in OVDP
- They are afraid of the IRS
- They are scared to represent you in an OVDP Opt-Out
- They have never litigated a case or handled an Eggshell Audit.
If an attorney tells you that you should go streamlined without properly evaluating your entire situation with you (which typically cannot be accomplished during a hurried “free” initial consultation), you should thank them, and move onto the next Attorney.
They say to Go Streamlined Because The IRS Will Never find you
How do they know this? The reality is, the IRS audits and audits/examines many, many taxpayers each year. It is impossible to know if the IRS will find you. But, maybe they will.
Are you willing to risk your freedom, along with a 100% penalty for a multi-year audit by knowingly submitting to the Streamlined Program (which is only for non-willful individuals) and falsely stating under penalty of perjury that you were non-willful, when you know you weren’t?
You Were only Willful for a few Years
So What? That still makes you willful and there is no exception for individuals who were only willful for a year or two. If you were willful, then you can submit to OVDP and then opt-out. That is your only option, presuming you are going to submit to one of the Offshore Voluntary Disclosure Programs.
You Do Not Meet the CPA or EA Beforehand
You are hiring a firm to handle your Offshore Disclosure. If the Attorney(s) are not also Tax preparers (CPA or EA), and they do not have CPAs or EAs on staff, then how do you know who is preparing your tax returns?
You should have an opportunity to interview the CPA or EA to determine:
- Do they have any experience in preparing returns for your particular country?
- How many returns have they prepared?
- Do you get to meet with them along with the Attorney to ask questions during the process?
- What if you do not like the CPA, can you get a Refund?
- Have other clients had good experience with the CPA or EA?
These are questions to consider before signing with a firm for OVDP (or Streamlined).
Questions to Ask a Potential OVDP or Streamlined Lawyer
- How Many Offshore Disclosures have they personally handled in the Last 3 Years?
- What Portion of their practice is dedicated to Offshore Disclosure?
- How many cases have they litigated, when they represented their own client?
- How Many Audits have they directly represented their own clients in?
- How many OVDP Opt-Outs have they handled?
- Did They work at the IRS as an attorney, or merely an Auditor or Examiner?
Understanding The OVDP Process
The following a brief summary about how the OVDP process 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.
Experienced OVDP Attorney
**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.
While a sole Attorney practitioner may offer a reduced rate, if they are not handling the tax preparation as well as the legal portion of the representation (including signing their own name) to the Tax Return and Legal Submission, then you have to wonder who is going to be handling that portion of the submission. Will you even get the chance to interview the CPA beforehand and work with them during the process?
Likewise, if the firm advertises or markets themselves as a Tax Resolution Firm that also handles OVDP or Offshore Voluntary Disclosure, you have to question how much experience they really have in OVDP, Streamlined, FATCA and FBAR compliance.
Who Do We Represent?
While each fact pattern and set of circumstances are different and unique, there are many types of individuals who fall into different categories of individuals who we represent often for OVDP.
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
Golding & Golding – Experienced OVDP Attorneys
There is a lot of mis-information and fear mongering online regarding offshore disclosure. There are also several “newbie attorneys” who do not have any real experience with offshore disclosure, and simply regurgitate information they find on the IRS website, claim it as their own — and try to sell clients with artificially reduced fees when they have no real experience.
We know this because many OVDP clients have come to us after having a horrible experience with one of these other Attorneys.