If you have tax issues stemming from underpayment or non-disclosure of foreign assets, you may have heard of the “OVDP” — the IRS’ Offshore Voluntary Disclosure Program. It’s a program the IRS offers taxpayers who are exposed to potential criminal liability and/or substantial civil penalties, due to mishandling of tax payments due on their foreign assets.
We understand that you may have questions about the OVDP, so we’ve compiled a list of the most common things our clients ask about the program.
Have a question you don’t see answered here? Contact our offices at (818) 396-5059 for a consultation with one of our attorneys regarding your specific OVDP situation.
I have unreported income and/or FBARs. Am I in danger of criminal prosecution?
The number of people actually criminally prosecuted by the IRS due to unreported foreign income and/or FBARs is small, but several thousand instances of indictment do happen every year. The IRS has proven that they are not to be trifled with in matters where they feel there has been willful nonpayment.
What might happen to me if I don’t voluntarily disclose, and the IRS later audits me?
The consequences of this can range from criminal penalties, as mentioned above, to civil penalties (more likely). The IRS position is that you are liable for 50% penalties on high balance unless you can prove otherwise.
Tax evasion is a serious criminal charge that can carry up to 5 years in prison and a quarter million dollar fine. Specifically, failing to file an FBAR can have penalties as high as 10 years and $500,000.
In terms of civil penalties, the possibilities are numerous. The civil penalty for failing to file an FBAR is especially draconian: often, it is as high as the greater of $100,000 or 50 percent of the total balance of the foreign account in question — per violation.
In addition, underpayment penalties, civil fraud penalties, penalties for failing to file, and inaccuracy penalties are all possibilities that the IRS may assess. The IRS is generally asserting civil fraud penalties in these cases.
Is the OVDP right for everyone who has unreported income and/or FBARs?
Not necessarily: there are other options, known as the “Streamlined program”, and a reasonable cause alternative. The Full OVDP carries the biggest offshore penalties, but may not be necessary depending on the client’s situation. Many clients qualify for the streamlined program, and some even will simply need to file the missing forms under the reasonable cause procedures. It all depends on the client’s unique situation, which is why it’s so important to retain an experienced tax attorney to advise you on the best course of action after extensively interviewing you to get a detailed handle on the facts.
Why Should I Choose Abajian Law To Help With The OVDP?
An important distinction is that Abajian Law is a tax law firm. This provides our clients with several advantages over hiring non-attorney tax CPAs or specialists. You can be assured that you have the utmost discretion and attorney-client privilege in effect at all times, during all dealings with our firm. The tax attorneys at Abajian Law have been helping clients solve their serious offshore tax matters for years, and Vic Abajian himself was a senior IRS trial attorney before starting his own practice.
We know what it takes to guide clients through the OVDP process — or around it, if possible — and minimize their legal obligation while coming into full compliance with the IRS.
Have more questions? Contact Abajian Law today at (818) 396-5059.