IRS Outlines the OVDP’s Streamlined Filing Compliance Procedures
It has grown increasingly difficult to evade the reach of IRS rules by concealing assets in offshore accounts. However, people who have kept their assets overseas have the opportunity to participate in the Offshore Voluntary Disclosure Program (OVDP) and avoid the threat of criminal prosecution for their non-compliance.
The OVDP should be especially attractive for people who failed to comply with IRS rules in good faith because they were unaware of their obligations. These people can take advantage of streamlined filing compliance procedures. Recently, the IRS decided to expand the scope of the streamlined procedures to encourage an even larger group of taxpayers to participate in the OVDP.
While the streamlined procedures initially applied only to American citizens who were living in foreign countries, they now apply to taxpayers who have a primary residence in the United States. Moreover, these procedures formerly were available only to people who owed less than $1,500 in taxes each year. The IRS now has removed this threshold requirement as well as a supplementary questionnaire.
Finally, the streamlined procedures that were first announced in 2012 included a risk assessment process that required an investigation of each individual taxpayer’s situation. This no longer will be required for people who want to become compliant with IRS rules by using the streamlined procedures. However, people who follow them still will be required to certify that their non-compliance was not intentional.
People who already are under investigation by the IRS will not be allowed to take advantage of this program. This is true whether the IRS has launched a civil or a criminal investigation of the individual. Also, compliance with the current OVDP does not erase penalties that a taxpayer owes to the IRS based on previous delinquent filings.
To use the streamlined procedures, a taxpayer must submit a valid Taxpayer Identification Number (TIN) with the tax returns. This is usually a Social Security Number (SSN), but people who are not eligible for an SSN can follow the IRS procedure for getting an Individual Taxpayer Identification Number (ITIN).
Returns submitted through this process may be subject to audit, just like any other returns. The IRS has stated that people who take advantage of the OVDP or its streamlined filing compliance procedures will not have their returns automatically audited or be at any special risk for audit. If an IRS audit of a return under this program suggests that information on the return is inaccurate, however, participating in the OVDP or the streamlined procedures does not shield a taxpayer from penalties for the inaccuracy.
People who participate in the OVDP will need to continue complying with IRS rules in the future. A renewed failure to comply will suggest bad faith and can trigger harsh penalties, including criminal prosecution and perhaps even a prison sentence.
Residents of Southern California who have kept assets in offshore accounts will want to consider using the OVDP to become compliant with the tax laws. Considering the significant consequences for non-compliance, any minor penalties associated with participating in the OVDP are a small price to pay. You may have questions about how to take advantage of the OVDP and the streamlined filing compliance procedures. Knowledgeable in this complex area of law, tax attorney William Hartsock has advised California clients with overseas assets on how to become compliant with IRS rules. To ask for his guidance, call (858) 481-4844 or contact him through this website today.