International Tax Amnesty Programs (OVDI/OVDP)

With the increase of enforcement represented by FATCA and other initiatives of the U.S. government, many U.S. expats and foreign nationals are looking for a strategy as to how to bring their foreign assets and holdings into compliance with U.S. tax law.

The IRS Is Cracking Down on Tax Cheats

The IRS has publicly stated that catching overseas tax dodgers is a top priority of the agency.  In a written statement, they said the agency is working to improve the way it identifies people who are still trying get around the agency’s disclosure programs.

The IRS has run four voluntary disclosure programs since 2003.  The last three — in 2009, 2011 and 2012 — have yielded almost $5.5 billion in back taxes, penalties and interest.  The latest program is still open however there are no guarantees as to how long these programs will remain open and when or if another program will be offered.

Who is eligible for OVDP?

Any individual with assets offshore who is living or working in the United States may be subject to U.S. withholding on those assets.  Even those who safely sheltered assets in offshore accounts for decades, are now subject to back taxes on those assets.

How Does OVDP Work?  

Under normal circumstances, evading tax or overstating one’s expenses and deductions can result in severe penalties.  With tax structured settlement programs, governments offer limited time to tax payers to pay back taxes and to file late tax returns.  Tax payers are however, also required to file their returns with the IRS.

Such programs are designed to encourage tax payers to file their tax returns and to pay overdue taxes. What people get in return is reduced penalties as an incentive to come forward and pay taxes – in some instances, the penalties can even be waived off completely. Structured settlement programs like the Offshore Voluntary Disclosure Initiative (OVDI) are also designed to enable tax payers who may have overstated their expenses or deductions to amend their tax returns. The purpose of these programs is to collect as much tax revenue as possible within a specified, short period of time. Tax payers are only given a small window of opportunity to come clean and comply with their tax obligations. Benefits of filing under structured settlement programs can also reduce the possibility of other adverse consequences, such as civil or criminal prosecution.

How Do I Become Compliant With The New IRS Foreign Asset Tax Rules?

One of the key issues to overcome in all this is the classification of foreign assets.  Whether you have undeclared foreign interest, or have inherited foreign property, the proper classification of assets can save you 10′s of thousands of dollars in taxes and penalties. The services of a certified public accountant and a tax attorney, with a proven track record in matters of tax compliance, can make filing these returns much more effective and much less painful. You can file late returns, revise filed returns and report additional income with the help of a tax attorney who has a sound knowledge of U.S. tax structured settlement programs and their effect on undeclared foreign holdings..

Contact Christopher J. Byrne now for a tax lawyer and tax accounting firm specializing in matters of tax compliance and International tax law compliance. Read details of our Offshore Voluntary Disclosure Initiative here.