Ines Zemelman, EA 25-Nov-13
OVDP - dangerous or not?
Weary US Citizens and Green Card Holders with undisclosed foreign financial accounts have been asking the same question since the 2009 OVDP (Offshore Voluntary Disclosure Program) went into effect: Is amnesty guaranteed by the IRS? Not being able to acquire a clear and concise answer to this question seems to be the very issue preventing some US Citizens with undisclosed foreign assets from coming forward and filing multiple years of FBARs to finally become compliant with FATCA regulations.
In the past few years, hundreds of thousands of Americans with undisclosed foreign financial accounts have ‘come clean’ with the IRS and Department of Treasury. Among these scores of individuals, there were some who were certain that they would either be required to pay maximum fees or fall victim to the IRS doing an about-face and filing criminal charges against them.
To the surprise of many, neither of these circumstances occurred. The first OVDP offered in 2009 turned out to be a successful program for both noncompliant US Persons and for the IRS seeking to collect the estimated billions of dollars of revenue lost to international tax evasion. American foreign financial account holders disclosed their foreign assets, the IRS stuck to its word that fewer penalties would be assessed and no criminal charges would be filed, and the stage was set for an even more productive 2011 OVDI.
Even still, though, skeptics who have had reservations since the first OVDP was offered in 2009 remain skeptical about the motives of the IRS – primarily because of the verbiage in each OVDP that’s been offered to date. Rather than guaranteeing amnesty from prosecution, the IRS uses phrases like: “…takes voluntary disclosures into account in deciding whether to recommend criminal prosecution,” and “…enables noncompliant taxpayers to minimize their chances of criminal prosecution.”
While some merely remain skeptical, others are even more skeptical about the 2012 OVDP than they were about the programs offered in 2009 and 2011. This increase in skepticism can be attributed to 2 things: Recent actions of the IRS having precleared certain taxpayers with accounts in Israel only to reject them from the program once information was acquired, and the fact that the 2012 OVDP clearly states: “There is no set deadline,” and “terms of the program could change at any time.” This is like telling fearful taxpayers, “We could decide to seek a federal indictment against you.”
With the threat of criminal prosecution hanging over the heads of American Citizens, there are still hundreds – if not thousands – of stateside Citizens and US Expats with undisclosed foreign financial accounts that are simply too concerned about the IRS’ lack of willingness to guarantee amnesty to take advantage of the OVDP. The reality is, though, that it seems to be the best chance taxpayers have of avoiding criminal prosecution.
You may or may not be aware of recent international developments that have taken place in response to the United States’ increased efforts on combating tax evasion, but a wide number of European Territories and other countries like Australia and Singapore are joining forces with each other and with the United States to begin sharing information regarding non-citizens with foreign financial accounts in 2014. While there is no set deadline for the 2012 OVDP to end, one can only assume that by the time the United States is able to get its hands on the information it desires it will no longer care to wait for voluntary disclosures and the OVDP will be closed once and for all.
If that’s the case, criminal prosecution will be all but guaranteed to American Citizens and US Expats who had failed to voluntarily disclose while the window of opportunity was still open.
If you’re ready to take your chances and finally disclose your foreign financial accounts to the Department of Treasury and/or file multiple years of back taxes with the IRS, we at Taxes for Expats can help make the entire process less overwhelming…Give us a call.