On September 28, 2018 the Internal Revenue Service will end the Offshore Voluntary Disclosure Program (OVDP). The major benefit of the Offshore Voluntary Disclosure Program is that a person who enters and successfully completes the program will not be criminally prosecuted for failing to report the offshore accounts and tax evasion. If you know of anyone who may benefit from the OVDP, they should act promptly in order to properly prepare the application for submission before the OVDP closes. The IRS has announced that OVDP submissions must be complete by the September 28th, 2018 deadline.
The current version of the OVDP provides for a civil offshore penalty of 27 1/2% (or 50% depending upon the foreign financial institution) of the highest amount of the offshore accounts during the eight-year disclosure period. In addition, the program requires the filing of amended tax returns for the previous 8 years which properly reflects income and taxes, not only from offshore income but also U.S. income not previously reported. Payment of interest, past due taxes and usually a 20% accuracy penalty in addition to the offshore penalty will be required. While this amount can be costly, the benefit of avoiding prison cannot be measured in dollars.
The ability to enter the current OVDP is not unlimited. Certain factors prohibit admission to the OVDP; these include: (1) currently being under audit by the IRS, (2) if the IRS has already received offshore banking records through other means, (3) the person is under criminal investigation, (4) the source of the offshore funds was from illegal activity. A careful review of these factors is necessary before deciding to enter the OVDP. If a person enters the OVDP but is subject to one of the exclusions, the information provided may actually serve as the basis of a criminal prosecution. For that reason, it is important that anyone considering entering the OVDP before it ends should consult with an attorney experienced in successfully guiding clients through the Program.
It has been our honor and privilege to have guided many clients through the Program successfully. If you know anyone who has an unreported offshore account, you should advise them of the termination date of the OVDP. The OVDP submission requires detailed information including offshore banking records. The time required to obtain records from offshore banks can be lengthy depending on the bank. In order to meet the September 28, 2018 deadline, it is necessary to retain counsel as soon as possible to start the collection of necessary information including the offshore bank records.