IRS OVDI – I have an undeclared foreign bank account. What do I do?
Ownership of an undeclared foreign bank account can cause the average American taxpayer to feel a sense of impending doom. Due to the many disclosure laws that have been implemented over the years, and the potential fines and criminal penalties they may face, a taxpayer in this situation can feel overwhelmed by the sense that their accounts will be discovered by the US government at any time. What should you, as a taxpayer, do if you are in this situation?
During the past few years, the IRS has implemented several rounds of the Offshore Voluntary Disclosure Program in order to encourage those who may have been hiding assets offshore to declare these assets. Instead of facing some of the more serious penalties that are usually given when these assets are discovered by the IRS, those who disclose their assets are offered the opportunity to avoid some of the normally heavy civil penalties and potential criminal prosecution. The latest iteration of the amnesty program started in 2012, and is known as the 2012 Offshore Voluntary Disclosure program. Unlike the previous programs, this program is open-ended and an ending time has not been announced. However, in the meantime, those with hidden foreign accounts still face hefty civil and criminal penalties if they do not voluntarily disclose their foreign accounts.
If you find yourself in the harrowingly frightening position of having accounts that have not been disclosed, the Offshore Voluntary Disclosure Program may be your best option. In order to apply for the program, you must amend all tax returns to reflect the newly disclosed assets. You must also complete the Offshore Voluntary Disclosure documents, and you must pay a penalty of 27.5% of the highest total aggregate of all newly disclosed account, or make arrangements to pay this penalty. You must also meet any other financial reporting requirements, including filing FBAR reports, and if the accounts total more than $500,000 in value, copies of all activities in the accounts must be submitted.
There are several other documents that the IRS may require you to provide based on type of assets involved, and if the assets are in trust or given as a gift. Due to the complex nature of fulfilling the requirement, it may be to your advantage if you involve a tax professional, or someone who is familiar with the disclosure program to assist you in making sure all documents that need to be filed are included when you submit your information to the IRS.
______________________________________________________________________
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.
Bibliography
IRS. (2014, February 24). Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers. Retrieved from Internal Revenue Service: https://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers
Leave a Reply