U.S. taxpayers who own assets held in foreign countries are required to report the assets to the Internal Revenue Service (IRS) and pay taxes on income from the assets. For taxpayers who have not met their reporting requirements, the IRS has provided a variety of methods for compliance, including the Offshore Voluntary Disclosure Program (OVDP). However, the IRS has announced that the OVDP will end September 28, 2018.
Offshore Tax Compliance Options
The current version of the OVDP, which was instituted in 2014, allows taxpayers with undisclosed foreign assets to become compliant with IRS requirements, thus minimizing the civil penalties they are required to pay and avoiding the possibility of criminal prosecution for tax evasion. This program is meant to allow those who have willfully failed to report foreign assets to achieve compliance and pay any taxes that are owed, as well as applicable penalties.
Those who qualify for the OVDP may wish to make use of this program before it ends. For those who are unable to participate in the program, other offshore compliance options are available, including:
Streamlined compliance – This program is available to taxpayers whose failure to disclose foreign assets was non-willful — they were not aware of their obligations for disclosing foreign assets or they made reporting mistakes. Participants must pay taxes that are due as well as any applicable penalties. Additionally, they may be subject to criminal prosecution if their non-compliance is found to be willful.
IRS Criminal Investigation Voluntary Disclosure Program – The IRS’s Criminal Investigation division allows taxpayers to make voluntary disclosures of non-compliance. The IRS reviews these cases and determines whether to pursue criminal prosecution or refer them for a civil examination.
Delinquent FBAR submission – Taxpayers who have not filed their required Foreign Bank and Financial Account Reports (FBARs) may be able to file FBARs along with an explanation for the delinquent submission, therefore allowing them to avoid penalties as long as they have properly paid taxes on foreign income. This option is only available to taxpayers who are not currently under an IRS civil examination or criminal investigation and who have not already been contacted by the IRS about delinquent reporting.
Delinquent international information return submission - Taxpayers who have not filed required tax returns containing international information may file these forms along with a statement providing reasonable cause for their delinquency. This option is only available to taxpayers who are not currently under an IRS civil examination or criminal investigation and who have not already been contacted by the IRS about delinquent reporting.
Contact a San Jose Tax Compliance Attorney
If you own foreign assets that have not been disclosed to the IRS, it is important to act quickly to determine whether you should use the OVDP to become compliant while the program is still available. John D. Teter Law Offices can help you understand your requirements for compliance and work with you to minimize your civil and/or criminal penalties. Contact a San Jose tax lawyer today by calling 408-866-1810.