Understanding the Offshore Voluntary Disclosure Program

Dec 24, 16 Understanding the Offshore Voluntary Disclosure Program

In finances, as with anything else important in life, it’s possible for things to go wrong. Sometimes, things can go very wrong and it can feel like there’s no way out without making everything worse. When undisclosed assets pile up and tax season is approaching once again, you may not even feel like trying to sort out your financial mess. That’s why the Offshore Voluntary Disclosure Program, or OVDP, is available. It provides a way out for people whose undisclosed assets have gotten out of control and who want to bring themselves back into line with all legal requirements surrounding their financial situation.

What Is an OVDP?

An Offshore Voluntary Disclosure Program is a program set up for people who have offshore assets that have not appeared on their tax returns, as they are legally required to do. It counts on the individual to come forward and declare the assets that they had previously left undisclosed, and pay any overdue taxes those assets may have accrued. An OVDP counts on you to make contact first, or talk to an international tax consultant in order to proceed.

Why Should I consider an OVDP?

Fixing financial problems can be a huge hassle and it can be tempting to simply ignore an issue like undisclosed financial assets, especially if it seems that they will never come to light. However, this is not only unethical; it’s potentially quite risky. You never know when your situation might change, making an audit more likely, or otherwise making it easier for your undisclosed assets to come to light in a way you didn’t choose. An Offshore Voluntary Disclosure Program gives you a way to take control of a difficult situation before it even happens by bringing your tax returns up to date on your own terms.

How Do I Know If I’m Eligible?

In order to be able to benefit from an OVDP (www.irs.gov/individuals/international-taxpayers/offshore-voluntary-disclosure-program), you must meet certain conditions. First, the funds in your offshore accounts must be derived from legal activities. If you made that money by breaking the law, it cannot be brought to the table for an OVDP. The program also requires that you have not made a submission pursuant to a streamlined procedure, so avoid doing that if you are considering an Offshore Voluntary Disclosure Program. It is also vital that you not be under investigation by the IRS. This includes both civil examinations and criminal investigations. If you are unsure of your status when it comes to applying for an OVDP, speak to an attorney. They will be able to clarify the procedure surrounding the OVDP and answer any questions you might have.

What Will I Need to Do?

There are a few tasks you will need to complete as you pursue an OVDP. First, in order to kick off the process, you will need to bring yourself up to date with filing your taxes. Up to eight years of tax returns will need to be filled out accurately and submitted. If you submitted those tax returns already, you will need to amend them to more truthfully reflect your offshore assets. The same goes for your FBARs. You will need to bring them up to date for at least the past 8 years. When those taxes have been correctly calculated, you will be required to pay them along with any interest and penalties that have accrued. On top of that, an additional penalty of up to 50% of your highest undeclared assets will have to be paid. This may seem steep but it is better than losing all of your offshore assets to an audit or other legal trouble.

How Do I Get Started?

If you have decided to honestly and accurately update your taxes, the first thing you should do is contact an attorney to help you get started with an Offshore Voluntary Disclosure Program. They can help you provide a precise reporting of your undeclared offshore assets and help to minimize the penalties you will have to pay. It might seem like a difficult or onerous task, but an attorney can take a great deal of the pressure off of you as you update your finances, and you will finally have the peace of mind of knowing that you can weather any investigation into your financial life.