Offshore Voluntary Compliance Program
International tax attorneys representing Baltimore and Washington D.C. residents with Offshore Voluntary Compliance
Pursuant to federal law, all taxpayers in the United States who possess interests or assets in offshore bank accounts must disclose that fact and report all income on their tax returns. Assets or interests totaling $10,000 or more must be revealed on a Report of Foreign Bank and Financial Accounts ("FBAR"), and taxpayers who fail to fulfill this obligation leave themselves vulnerable to civil fines, criminal tax prosecution and even imprisonment. If you suspect that you have not accurately or appropriately reported foreign assets on your U.S. returns, the Baltimore tax attorneys of Rosenberg Martin Greenberg can help you return to full compliance with the IRS.
FBAR Filing Requirements
Broadly speaking, it is necessary to file an FBAR for any tax year in which you meet the following conditions:
- You are classified as a United States "person" (a category that can include legal residents in possession of a visa);
- You are deemed to possess a "financial interest" or signatory power over a financial account in any foreign jurisdiction or country; and
- The total value of those foreign interests or accounts is greater than $10,000 at any point in time during the tax year.
The potential penalties for taxpayers who have not followed proper filing procedures can be quite serious, though the specific sanctions will depend on whether or not the violation was "willful" or "non-willful" in the eyes of the IRS. Civil penalties for non-willful violations can result in fines of $10,000 per individual violation, with fraud penalties of 75% of the tax owing also possible. Willful violations may be penalized even more severely, with civil sanctions of $100,000 or half the balance of the offending foreign account possible. Criminal penalties for willful violations can be even harsher, bringing the potential for fines ranging between $250,000 and $500,000 and terms of imprisonment up to ten years.
Unfortunately, large numbers of individuals impacted by these disclosure rules who have been under obligation to file FBARs for one or more tax years have simply been unaware of the IRS requirements. As a result, they often find themselves the subject of IRS investigations and facing the threat of penalties. Such individuals often require professional assistance navigating the complicated regulations and filing processes so that they can regain tax compliant status in the eyes of the government. If you are among those who need help to determine the most effective route to full compliance, an international tax lawyer with Rosenberg Martin Greenberg can provide critical expertise.
IRS Offshore Voluntary Compliance Program
In recognition of the fact that significant numbers of taxpayers with foreign bank accounts and financial interests did not realize their obligation to file FBARs, the IRS instituted the Offshore Voluntary Disclosure Program (OVDP) a way to help those individuals settle previous non-compliance and regain good standing with the agency. The 2012 version of the programs was structured to permit taxpayers to come forth with their non-disclosed accounts with the assurance that they would not be subjected to criminal prosecution for earlier failures to do so. In addition, the program provided for a fixed penalty structure intended to remove some of the uncertainty and anxiety the disclosure process might otherwise cause.
To participate in the Offshore Voluntary Disclosure Program, a taxpayer is required to:
- Submit copies of all previously filed original and amended income tax returns for the years relevant to the voluntary disclosures;
- Submit complete and fully accurate amended income tax returns for the applicable years;
- File complete original or amended offshore information returns, for the relevant tax years;
- Provide full cooperation regarding the voluntary disclosure process, including providing all requested information on offshore institutions or offshore bank accounts and signing necessary agreements to extend the time period for the assessment of FBAR penalties or other liabilities.
2014 Modifications to OVDP
In the summer of 2014, certain key modifications were made to the 2012 OVDP, of which taxpayers considering disclosure should be aware. Taxpayers are now required to submit all relevant account statements as well as payment of their offshore penalty at the time of application to the program. The offshore penalty was also increased from 27.5% to 50% if, prior to the taxpayer's OVDP application, the relevant foreign financial institution is revealed to be under IRS investigation.
The 2014 changes also increased the documentation required for participation in the program, underscoring the need to enlist the aid of tax attorneys to ensure that compliance is ultimately achieved. At Rosenberg Martin Greenberg, we have the experience and know-how required to assess your specific tax situation and develop a strategy that will resolve your disclosure issues once and for all.
Streamlined IRS filing Compliance Procedures
To further increase the number of previously non-compliant taxpayers coming forth to disclose offshore financial interests and accounts, the IRS recently instituted a so-called Streamlined amnesty program for taxpayers who certify that their non-compliance was non-willful in nature. The difference between using the Streamlined program and the OVDP can be significant, in terms of the former's simplified filing requirements, the lower amount of penalties assessed and the reduction in potential exposure to criminal prosecution.
The benefits of choosing the Streamlined program may seem obvious, but participation is strictly limited to those taxpayers who certify, under penalty of perjury, that the conduct that led to their FBAR non-compliance was not willful. The IRS has stated that the test for "willfulness" in this arena is whether the taxpayer engaged in a "voluntary, intentional violation of a known legal duty." Unfortunately, the concept is not as straightforward as it might initially seem, and questions of simple mistakes, paperwork errors and willful blindness on the part of taxpayers can muddy the waters considerably. Under such circumstances, there is no substitute for the assistance of legal counsel who can untangle and interpret your specific factual scenario in order to make the strongest possible arguments to the IRS on your behalf.
International Tax Attorneys Helping Baltimore Residents
The attorneys at Rosenberg Martin Greenberg understand how unsettling it can be for a taxpayer to realize that they are out of compliance with IRS FBAR requirements. The prospect of hefty financial penalties and even criminal prosecution can have a paralyzing effect on many.
However, if you find yourself in this unenviable situation, time is not on your side. The sooner you enlist the aid of a knowledgeable tax lawyer, the sooner you can begin the process of mitigating potential sanctions and reclaiming your status as a taxpayer in good standing. To schedule a personal consultation, contact Brian Crepeau at email@example.com.
Talk to a Baltimore Tax Attorney Today
If you are seeking counsel for a tax related legal matter, contact the Rosenberg Martin Greenberg Tax Controversy experts.
Tax Controversy News
Earlier this year, the Supreme Court decided on the much-anticipated case of South Dakota v. Wayfair, 585 U.S. ___, 138 S.Ct. 2080 (2018). At issue was the validity of a statute applying sales tax to internet retailers that had very limited economic nexus to the state (i.e., without property or employees in the state). By…
Small business owners make up the bulk of American businesses. According to the Small Business Administration, in 2010, there were nearly 28 million small businesses, making up 99.7% of U.S. employer firms. More than 50% of the small businesses were home-based, and nearly 75% were sole proprietors. The vast majority of Maryland businesses, then, can…
At best, a business tax audit will consume only time and personnel resources. At worst, you and your business could face criminal charges and payments of additional taxes, fines, and penalties. Moreover, if the audit uncovers fraudulent activity, substantial underpayments of taxes, or unreported income an audit can be expanded from three to six years,…