Are you thinking about the offshore voluntary disclosure program? If the program applies to you, then you might want to do more than think about applying. If you don’t, you could be looking at some hefty penalties for failing to disclose your offshore assets.
What is the offshore voluntary disclosure program?
The IRS defines the objective of the offshore voluntary disclosure program as the aim “to bring taxpayers that have used undisclosed foreign accounts and assets, including those held through undisclosed foreign entities, to avoid or evade tax into compliance with United States tax and related laws.” The program was created and continues to be upheld because the IRS believes in the value of providing uniform penalty structures for individuals who voluntarily come forward to report previously undisclosed foreign accounts and assets. Taxpayers are given the opportunity to receive predictable and calculable penalties for volunteering their information rather than facing heavier penalties and even jail time. The other bonus is that more cases of undisclosed foreign assets are resolved without examination.
Why should you utilize the offshore voluntary disclosure program?
The offshore voluntary disclosure program can help you become compliant with tax laws without having to face severe penalties and even criminal prosecution. Noncompliance and failing to file FBARs can cause you to face substantial civil penalties, including a $100,000 (or 50 percent of the total balance of the foreign financial account) per violation civil penalty for willfully failing to file an FBAR; a $10,000 penalty (with an additional $10,000 added per month following the 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return) for failing to file Form 8938; a $10,000 (or 35 percent of the gross reportable amount) penalty for failing to file Form 3520; a $10,000 (or 5 percent of the gross value of trust assets) penalty for failing to file Form 3520-A; a $10,000 (with an additional $10,000 per month following the 90 day notification period, up to a maximum of $50,000 per return) penalty for failing to file Form 5471; a $10,000 (with an additional $10,000 per month following the 90 day notification period, up to a maximum of $50,000 per return) penalty for failing to file Form 5472; a penalty of 10 percent of the value of the property transferred for failing to file Form 926; a $10,000 penalty for failure to file Form 8865 (with an additional $10,000 per month following the 90 day notification period); fraud penalty liability up to approximately 75 percent of the unpaid tax; and foreign information return penalties. In addition, the taxpayer faces an increased risk of criminal prosecution for charges relating to tax evasion, filing a false return, failing to file an income tax return, willfully falsifying or failing to file an FBAR, conspiracy to defraud the government, and conspiracy to commit offense or to defraud the United States. If convicted, you could face prison term of up to ten years and a fine of up to $500,000.
If you choose to avoid being detected by the IRS by using the offshore voluntary disclosure program to amend past returns, you will eliminate the risk of criminal prosecution and will provide yourself the opportunity to face reasonable and calculable penalties to resolve the tax issues and return to a state of compliance.
Esquire Group, a boutique international tax advisory firm specializing in tax consulting, tax planning and compliance and helping corporate and individual taxpayers with Offshore Voluntary Disclosure Program ( www.EsquireGroup.com/Offshore-Voluntary-Disclosure-Program ), asset protection, and US expat taxes. To learn more about us, visit www.EsquireGroup.com/About.