Under the IRS Offshore Voluntary Disclosure Program, taxpayers have the opportunity of making a voluntary disclosure of all their offshore financial accounts and assets to the IRS. In exchange for making the voluntary disclosure, the IRS offers taxpayers a decreased risk of criminal prosecution for federal tax crimes and assorted fines and penalties. In order to validly take part in the program, the taxpayer’s disclosure must be timely, complete, and accurate. But those terms are not always crystal clear to the average taxpayer. In this article we will offer some clarity to ensure that your disclosure meets the requirement of being “timely” and you have the best chance of being accepted into the program.
What Constitutes a Timely Disclosure Under OVDP?
The IRS considers a disclosure “timely” under OVDP if it is received before the IRS has taken certain steps against the taxpayer. Therefore, your disclosure must be received by the IRS before any of the following have taken place:
- If received before the IRS has initiated a civil examination or criminal examination of the taxpayer, or informed the taxpayer that it intends to do so;
- If received before the IRS has received information from a third party (such as a governmental agency or the media) informing the IRS of a particular taxpayer’s noncompliance;
- If received before the IRS has initiated a civil examination or criminal investigation directly related to the taxpayer’s liability; or
- If received before the IRS has acquired information directly related to the specific liability of the taxpayer from a criminal enforcement action, such as a grand jury subpoena or search warrant.
A taxpayer who failed to even file tax return may still make a qualified voluntary disclosure for the purposes of OVDP. A disclosure made by such a taxpayer is considered voluntary even if it is made after the taxpayer receives notice from the IRS regarding the failure to file a return for a particular year. If the taxpayer files a return, pays all taxes associated with the unfiled return, and makes a voluntary disclosure before the IRS officially commences an investigation into the unfiled return and unpaid tax, then the taxpayer has successfully made a voluntary disclosure under OVDP.
How a Tax Attorney Can Help
If you have offshore foreign accounts or assets, you may be eligible to participate in OVDP. In order to evaluate whether OVDP is the right decision for your international tax situation, you should consider consulting a knowledgeable tax attorney.
San Diego Tax Lawyer - William D Hartsock, Esq. has been successfully helping clients with tax issues related to their foreign assets since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.