The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for the following clarifications to the OVDP program:
- Continuation of 2012 OVDP. The "revamped" OVDP is not a new program but rather a continuation of the 2012 OVDP with modified terms. Thus, it still has no set deadline for taxpayers to apply. IRS also reminds taxpayers that the terms of the program (i.e., penalty amounts and/or eligibility) are subject to change, and that the agency could decide to end the program entirely at any time. (FAQ #1)
- Increased penalty in certain situations. A 50% penalty applies if either a foreign financial institution (FFI) at which the taxpayer has or had an account, or a facilitator who helped the taxpayer establish or maintain an offshore arrangement, has been publicly identified as being under investigation or as cooperating with a government investigation as we discussed in "OVDP Penalty Increased To 50%! "
- Reduced penalty structure eliminated. The reduced penalty structure has been eliminated due to the expansion of the streamlined filing compliance procedures. (FAQ #1.1)
- Potential penalties for non-disclosers. IRS provided a list of penalties that could potentially apply to a taxpayer that doesn't participate in the OVDP and is examined by IRS. These include penalties (many of which can run from $10,000 to $100,000) for failing to file a host of forms, including FBARs; fraud penalties under Code Sec. 6651(f) or Code Sec. 6663; a penalty for failing to file a tax return under Code Sec. 6651(a)(1); a penalty for failing to pay the amount of tax shown on the return under Code Sec. 6651(a)(2) ; and an accuracy-related penalty under Code Sec. 6662; which cumulatively total 325% of the Highest Amount - See FAQ #8.
- Potential criminal charges for non-disclosers. Possible criminal charges related to tax matters include tax evasion under Code Sec. 7201, filing a false return under Code Sec. 7206(1) and failure to file an income tax return under Code Sec. 7203; willfully failing to file an FBAR and willfully filing a false FBAR (31 USC 5322); conspiracy to defraud the government with respect to claims (18 USC 286); and conspiracy to commit offense or to defraud the U.S. (18 USC 371)
- Effect of prior "quiet disclosures." IRS encouraged taxpayers who have already filed amended returns reporting income from OVDP assets without actually making voluntary disclosures to participate in the OVDP by submitting an application with copies of the previously filed returns and all other required information. IRS emphasized that quiet disclosures provide no protection from criminal prosecution and may lead to civil examination and the imposition of all applicable penalties. (FAQ #15)
- Effective date. The revised FAQs are effective for all new submissions made on or after July 1, 2014. (FAQ #1.2)
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