People living in the USA hate the IRS and their tax rules. Their agents are the most implacable individuals and will do whatever they can to get back the taxes. If you are affected by the IRS Offshore Voluntary Disclosure Initiative (OVDI), it could be a complicated issue and most people do not know what to do when they are approached by the IRS. An OVDI attorney can be very helpful in getting you through this situation safely. This voluntary disclosure program is mainly used by individuals who are immigrants to United States and people with dual citizenship.
The Offshore Voluntary Disclosure Initiative (OVDI) has been around since the year 2009 to help taxpayers with undisclosed overseas accounts to voluntarily disclose the details to the IRS. These individuals must pay the required taxes with interest along with a 20% penalty on the highest balance they have on their foreign accounts. In 2009, nearly 5,000 citizens made use of the program so as to avoid court proceedings and higher penalty charges. Anyone who has more than $10,000 of offshore accounts should report it to the Internal Revenue Service.
In 2011, the IRS made some changes to the 2009 OVDI since lot of people complained that the charges were too much even for those who made genuine mistakes in reporting accounts and had no intention of evading the required taxes. An opt-out procedure was introduced, though the overall penalty structure was increased. During that time, people had to pay a 25% penalty on the offshore balance as opposed to 20% in the 2009 OVDI. Also, instead of six, the IRS began to cover an eight-year period of time when looking back for the highest account balance. However, the individuals who don’t have any intention of attempting to defraud the Internal Revenue Service to avoid the taxes and simply made an error in FBAR reporting can claim a lower penalty rate. The federal agency can consider these special circumstances and can demand only a 5% penalty.
At the beginning of the year 2012, the FBAR penalty was again raised by the IRS to 27.5%. The IRS is often rather tough on these new regulations, and it is strongly advised that you don’t attempt a “soft” disclosure. A tax settlement firm could guide you during the entire OVDP process, and generally they like you to come clean because although expensive, it is the best way to handle the IRS. As of May 2012, nearly 2,500 OVDI’s had been filed. The Internal Revenue Service is completely overwhelmed by this high number of OVDI reports and, in case they decide to be unreasonable in assessing your OVDI penalties, there isn’t much you could do. That’s the reason why it is so essential to have an OVDI attorney to help you out with this process.
If you’re going to opt out from the OVDI program, look for all other options that are available to you before considering this decision. It is safe for you and your assets when you come clean. The IRS won’t take this issue lightly, and so the penalty can be very costly. Not only that, but charges can be filed as well.