{"id":4432,"date":"2016-05-12T01:44:10","date_gmt":"2016-05-12T05:44:10","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=4432"},"modified":"2020-09-17T12:00:21","modified_gmt":"2020-09-17T17:00:21","slug":"irs-offshore-voluntary-disclosure-program-2016","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/irs-offshore-voluntary-disclosure-program-2016\/","title":{"rendered":"IRS Offshore Voluntary Disclosure Program 2016"},"content":{"rendered":"

IRS Offshore Voluntary Disclosure Program 2016<\/strong><\/h2>\n

Here\u2019s everything you need to know about the Offshore Voluntary Disclosure Program 2016. If you are a US citizen with an undeclared offshore bank account or offshore corporation, it\u2019s not too late to come and get right with the IRS. If you\u2019re caught at Balboa Bank or in the Panama Papers, or have yet to be found out, I strongly suggest you take advantage of the IRS Offshore Voluntary Disclosure Program 2016.<\/p>\n

Whether you have been living abroad for decades, or are a true blue US resident, so long as you hold a US passport, you must report your offshore accounts. The Offshore Voluntary Disclosure Program 2016 has an option for each group, and I will explain them here.<\/p>\n

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History up to the Offshore Voluntary Disclosure Program 2016<\/strong><\/h2>\n

The requirement to report foreign bank accounts (FBAR), foreign corporations (Form 5471), and to check a box on Schedule B of your personal return informing the IRS of your offshore accounts, have been around for decades. However, because the US didn\u2019t bother to enforce these laws, few tax preparers were aware of these rules. For a time, offshore tax evasion was a term used against real criminals (think offshore ponzi scheme guys).<\/p>\n

Then, going after Americans for their offshore accounts became profitable.<\/p>\n

In about 2002, the IRS decided to target US citizens with foreign accounts. The government issued a subpoena to MasterCard and Visa and received a report naming thousands of Americans with credit \/ debit cards linked to foreign accounts.<\/p>\n

The Service began auditing everyone on the MasterCard \/ Visa list, requiring them to report interest income from these accounts and usually charging a 25% penalty for fail to report. In extreme cases, the IRS added a 50% negligence penalty. Criminal penalties where unheard of at this time, and the negligence penalty could often be negotiated away.<\/p>\n

Based on the success of this project, the IRS decided to double down. In 2006, the US Treasury, along with a number of other agencies, declared war on Swiss banks, particularly UBS.<\/p>\n

UBS was particularly susceptible to this attack because they had a US banking license and hundreds of millions in cash and assets in the United States. All the government had to do was tell UBS they would lose their US license and the cash in the Federal Reserve would be forfeit for the house of cards to fall.<\/p>\n

While the negotiation took years, UBS had lost the battle before it even began. And it was only a matter of time before all of the Swiss Banks followed suite.<\/p>\n

Once the US government broke down the Swiss wall of secrecy, which had withstood for so many years, including through World War II, they began targeting US citizens with foreign accounts.<\/p>\n

But, this time around, things were very different. Gone was the kind and gentle taxman who just took your money. He had been replaced by the IRS Criminal Investigation Division who carried guns and threats of incarceration.<\/p>\n

The IRS decided to make examples of as many citizens as possible and make the punishment so harsh that anyone with an unreported offshore account would come forward voluntarily out of fear.<\/p>\n

To maximize the value of this marketing program \/ tax collection plan, the IRS brought out the big guns. They charged a few persons in each State with a crime, usually putting them in jail for 5 years or more, and taking everything from them. These poster boys and girls were then hung out on the web like pelts to inspire fear.<\/p>\n

At the same time, the IRS came out with the first Offshore Voluntary Disclosure Program. It\u2019s provided an avenue for those with offshore accounts to come forward and avoid prosecution\u2026 a conduit for the collection of tax and penalties from offshore accounts not caught in the Swiss web\u2026 and the plan worked to perfection.<\/p>\n

Starting with the 2009 Offshore Voluntary Disclosure Program, with changes in 2011, 2012, and 2014, the IRS had great success bringing in the cash. Over the years, over 50,000 people have disclosed, paying about $7 billion in back taxes, interest and penalties.<\/p>\n

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And this brings us to the current offshore programs.<\/p>\n

Current IRS Offshore Voluntary Disclosure Program 2016 <\/strong><\/h2>\n

There are several programs within the IRS Offshore Voluntary Disclosure Initiative (OVDI) to choose from:<\/p>\n

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  1. Offshore Voluntary Disclosure Program 2016,<\/li>\n
  2. Domestic Streamlined,<\/li>\n
  3. Foreign Streamlined,<\/li>\n
  4. Transitional Relief, and<\/li>\n
  5. Delinquent FBAR.<\/li>\n<\/ol>\n

    Note on Terminology: <\/strong>The proper name the general IRS program covering each of the above is the Offshore Voluntary Disclosure Initiative\u00a0 (OVDI). When searching IRS.gov for information, the current OVDP is titled 2012 Offshore Voluntary Disclosure Program. This program has gone through many amendments since 2012, with the biggest changes coming in 2014. This is why you will see a 2014 OVDP referenced by many authors (but not on on IRS.gov). I the terms Offshore Voluntary Disclosure Program 2016 and OVDP interchangeably.<\/p>\n

    The focus of this article are the Offshore Voluntary Disclosure Program 2016 and Streamlined options. Let me quickly mention options 4 and 5 for completeness.<\/p>\n

    Clients who reported all of their income, paid all their US taxes, were not wilful in failing to report, but forgot to file FBARs can simply file their forms and be done with the IRS. This used to be covered under OVDP FAQs #17 and #18. Now, the IRS calls it the Delinquent FBAR and Delinquent International Information Return procedures. Before using these programs you must be absolutely sure that you paid all of your US taxes\u2026 and that your returns will stand up to an audit<\/u>.<\/p>\n

    The Offshore Voluntary Disclosure Program 2016 is the most complex member of the OVDI team. It\u2019s for those who believe they have some risk of criminal prosecution or are otherwise unable to sign a pledge that they were not willful<\/u> in failing to file and report their foreign account. The Offshore Voluntary Disclosure Program 2016 requires you file 8 years of amended tax returns and FBARs. You pay taxes, interest and a 20% penalty on whatever you owe. For most people, there\u2019s also a 27.5% penalty on your highest offshore account balance. In some cases, that penalty may be 50% depending on the bank and timing.<\/p>\n