Missed OVDI? Despair Not - IRS Regular Disclosure Program is Still Available
If you missed the September 9, 2011 deadline for the IRS Offshore Voluntary Disclosure Initiative (OVDI) you should not bury your head in the sand and hope that the problem will go away (it won't). Fortunately a number of alternatives are available.
If you your are a US Citizen or permanent resident and have not filed all your past returns and other forms required for reporting of foreign assets (such as 5471, FBAR, Form 8865, etc), you can still take required steps to avoid large penalties or even criminal prosecution if the IRS finds you first. Doug Shulman - the IRS Comissioner - has gone on record stating that the IRS plans to pursue all taxpayers who are not filing appropriate offshore asset reporting forms: ""The time to comply with the U.S. tax code is now, as the risks of hiding money offshore keep rising."
- One venue available is the IRS traditional Offshore Disclosure program which has always been and is still available: http://www.irs.gov/newsroom/article/0,,id=216678,00.html. If you come forward yourself, the Investigation Division will most likely decide there is no criminal action required against you. After that, they will send your returns to the audit division for review and possible imposition of penalties.
- Another venue is to file your past tax returns together with the foreign asset reporting forms using regular filing procedures and hope the IRS does not discover you are filing the foreign asset reporting forms late. If you are discovered they may audit those returns and threaten to impose severe penalties. The penalties that may be imposed (even though they are rare) are explained on this page of our site: IRS Tax Penalties.
If you are still considering whether you should come clean to the IRS, you need to educate yourself about FATCA. This is a new act that came into effect on March 18, 2010. It will require foreign financial institutions - banks, brokers, pension funds, insurance companies - to report to the IRS all their clients who are U.S. persons.
It will come in full force in January 1, 2013. This will allow IRS to cross-check the list of people who have filed FBAR and those who must but did not. All institutions that do not comply will have a 30% withholding tax imposed on all their transactions concerning U.S. securities. In addition, FATCA will require that any foreign company not listed on a stock exchange or any foreign partnership which has 10% U.S. ownership to report to the IRS the names and tax I.D. number (TIN) of any U.S. owner.
You can read more about FATCA here:
What is the takeaway? If you are a US citizen with a foreign financial account, the institution will be required by law to report on you to the IRS in a year's time.