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San Jose foreign tax compliance lawyerU.S. taxpayers who own offshore accounts or other foreign assets may struggle to understand their requirements for reporting foreign investments to the Internal Revenue Service (IRS) and paying taxes on foreign income. In some cases, these matters have become even more confusing following recent changes to the programs the IRS has made available to taxpayers. In 2018, the IRS ended the Offshore Voluntary Disclosure Program (OVDP), and recently, it also took down the Delinquent International Information Return Submission Procedures (DIISP) from its website. This has left many taxpayers concerned about their ability to become compliant with IRS requirements and avoid penalties related to reporting foreign assets and income.

What Is DIISP?

Previously, the DIISP allowed taxpayers to receive a waiver of the penalties that would normally apply to unreported foreign assets. Taxpayers could qualify for the DIISP if they did not have any unreported income, as long as they could show that they had reasonable cause for their non-compliance, such as death, serious illness, natural disasters, or ignorance of tax laws.

The IRS quietly ended the DIISP in November 2020 without providing any notice that these procedures would no longer be available. Without this option, taxpayers will be required to follow other procedures to become compliant, and they may be subject to tax penalties.

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San Jose tax lawyer, Offshore Voluntary Disclosure Program, OVDP,  undisclosed foreign assets, IRS requirementsU.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. 

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undisclosed foreign assets, offshore tax compliance, San Jose tax lawyer, offshore voluntary disclosure program, IRSRecently, we examined the options taxpayers have to achieve compliance when they have undisclosed foreign assets. One key method of compliance that the IRS has provided in recent years is the Offshore Voluntary Disclosure Program (OVDP). The program allows taxpayers to report their offshore assets and become compliant while minimizing their civil penalties and avoiding criminal prosecution. However, the IRS recently announced that it will be ending the OVDP on September 28, 2018.

Changing Options for Offshore Tax Compliance

The OVDP was launched in 2009, and the current version of the program has been in effect since 2014. The IRS has reported that since the OVDP was implemented, more than 56,000 taxpayers have used the program to achieve compliance—$11.1 billion in taxes, penalties, and interest have been paid. However, the number of people participating in the program has declined from a high of 18,000 people in 2011 to 600 in 2017.

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