2011 OVDI Process

Q22: Can my representative talk to the IRS without revealing my identity?

A22: Yes, but hypothetical situations present a potential for misunderstanding that exists when there is no assurance that the hypothetical contains all relevant facts. In addition, posing a situation as a hypothetical does not satisfy the requirements for making a voluntary disclosure. If the IRS receives information relating specifically to the taxpayer’s undisclosed foreign accounts or undisclosed foreign entities while the hypothetical question is pending, the taxpayer may become ineligible to make a voluntary disclosure. If practitioners have questions about the terms of the voluntary disclosure program, they should contact the IRS OVDI Hotline at (267) 941-0020, visit www.irs.gov, or contact their nearest CI office with questions.

Q23: How do I request pre-clearance before I submit my offshore voluntary disclosure?

A23: For the 2011 OVDI pre-clearance may be requested as follows:

1. Taxpayers or representatives may fax to the Criminal Investigation Lead Development Center (LDC) identifying information (name, date of birth, social security number and address) and an executed power of attorney (if represented) to (215) 861-3050 to request pre-clearance before making an offshore voluntary disclosure.
2. Criminal Investigation will then notify taxpayers or their representatives via fax whether or not they are cleared to make an offshore voluntary disclosure.
3. Taxpayers deemed cleared should follow the steps outlined below (FAQ 24) within 30 days from receipt of the fax notification to make an offshore voluntary disclosure.
   • Copies of previously filed original (and, if applicable, previously filed amended) federal income tax returns for tax years covered by the voluntary disclosure;
   • Complete and accurate amended federal income tax returns (for individuals, Form 1040X, or original Form 1040 if delinquent) for all tax years covered by the voluntary disclosure, with applicable schedules detailing the amount and type of previously unreported income from the account or entity (e.g., Schedule B for interest and dividends, Schedule D for capital gains and losses, Schedule E for income from partnerships, S corporations, estates or trusts).
   • A completed Foreign Account or Asset Statement for each previously undisclosed foreign account or asset during the voluntary disclosure period (available at www.irs.gov);
   • For those applicants disclosing offshore financial accounts with an aggregate highest account balance in any year of $1 million or more, a completed Foreign Financial Institution Statement for each foreign financial institution with which the taxpayer had undisclosed accounts or transactions during the voluntary disclosure period (available at www.irs.gov);
   • Properly completed and signed Taxpayer Account Summary With Penalty Calculation (available at www.irs.gov);
   • A check payable to the Department of Treasury in the total amount of tax, interest, accuracy-related penalty, and, if applicable, the failure to file and failure to pay penalties, for the voluntary disclosure period. If you cannot pay the total amount of tax, interest, and penalties as described above, submit your proposed payment arrangement and a completed Collection Information Statement (Form 433-A, Collection Information Statement for Wage Earners and Self-employed Individuals, or Form 433-B, Collection Information Statement for Businesses, as appropriate) (see FAQ 20).
   • For those applicants disclosing offshore financial accounts with an aggregate highest account balance in any year of $500,000 or more, copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure. For those applicants disclosing offshore financial accounts with an aggregate highest account balance of less than $500,000, copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure must be readily available upon request.
   • Properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess FBAR penalties. Please see the Submission Requirements on the IRS’s website, www.irs.gov, for a complete description of the forms and other information that must be submitted.
   • The announcement by a multitude of offshore jurisdictions that they will exchange tax information with the U.S. including the identities of previously undisclosed U.S. account holders that have deposits with their foreign banking institutions.
   • The hiring and training of 800 special agents to investigate foreign accounts by the IRS.
   • Erosion of foreign banking secrecy laws established by the case law precedent value of the UBS litigation.
   • Recent legislation targeting foreign accounts, and increasing the IRS budget and manpower to pursue undeclared money offshore.
   • Pending IRS investigation of Credit Issues
   • Organization for Economic Co-operation and Development initiative against tax havens
   • The IRS suit against UBS is expected to reveal the identities of up to 52,000 U.S. account holders and IRS Commissioner Douglas Shulman has publicly stated that once the Swiss authorities transmit the information, “We will immediately follow up on the information we receive from the Swiss and we will vigorously enforce the laws against those who have attempted to evade their tax responsibilities by hiding their assets offshore.”

Pre-clearance does not guarantee a taxpayer acceptance into the 2011 OVDI. Taxpayers must truthfully, timely, and completely comply with all provisions of the offshore voluntary disclosure program.

Taxpayers or representatives with questions regarding pre-clearance can call (215) 861-3759 or contact their nearest CI office. For all other offshore voluntary disclosure questions call the IRS OVDI Hotline at (267) 941-0020.

Q24: How do I make an offshore voluntary disclosure and where should I submit my offshore voluntary disclosure to determine whether I am preliminarily accepted under this initiative?

A24: For the 2011 OVDI, an offshore voluntary disclosure is submitted as follows:

1. Taxpayers or their representatives should mail their Offshore VoluntaryDisclosures Letter to the following address:
   Offshore Voluntary Disclosure Coordinator
   600 Arch Street, Room 6404
   Philadelphia, PA 19106
2. Criminal Investigation will review the Offshore Voluntary Disclosures Letter received and notify taxpayers or representatives by mail whether their offshore voluntary disclosures have been preliminarily accepted or declined. It is intended that Criminal Investigation will complete its work within 30 days of receipt of a complete Offshore Voluntary Disclosures Letter. All other voluntary disclosures that are not covered under this initiative should follow the instructions that will be available at

Q25: After I am notified by CI that my disclosure is timely, what other information will I have to provide?

A25: The letter from CI will instruct the taxpayer or their representative to submit the full voluntary disclosure package of information to the Austin Campus:

Disclosure Initiative on or before August 31, 2011. This package must include:

You may also be contacted by an examiner with a request for specific additional information if needed to process your voluntary disclosure. The examiner will certify that your voluntary disclosure is correct, accurate, and complete by reviewing your records along with your amended or delinquent income tax returns. The examiner will also verify the tax, interest, and civil penalties you owe.

A full and complete submission is required for acceptance into the program.

Q26: Who will process my voluntary disclosure after I have submitted the information described in FAQ 25?

A26: After you send in your full and complete submission as described in FAQ 25, your case will be assigned to a civil examiner to complete the certification of your tax returns for accuracy, completeness and correctness.

Q27: Will my voluntary disclosure be subject to an examination?

A27: Normally, no examination will be conducted with respect to a voluntary disclosure made under this initiative, although the Service reserves the right to conduct an examination. The normal process is to assign the voluntary disclosure to an examiner to certify the accuracy and completeness of the voluntary disclosure. The certification process is less formal than an examination and does not carry with it all the rights and legal consequences of an examination. For example, the examiner will not send the usual taxpayer notices, the certification process will not constitute a “second examination” if one or more years in the voluntary disclosure has previously been examined, and the taxpayer will not have appeal rights with respect to the Service’s determination. However, the examiner has the right to ask any relevant questions, request any relevant documents, and even make third party contacts, if necessary to certify the accuracy of the amended returns, without converting the certification to an examination.

Q28: How long should the process take before it is completed?

A28: Because every case is different, there is no way to predict how long the process will take for you. However, the IRS has taken certain steps to improve our efficiency in processing cases. Moreover, there are certain steps you can take to expedite matters. If you have not already done so, you should have delinquent or amended tax returns prepared now because they must be submitted with your package by August 31, 2011. You should also start gathering all of your foreign account statements and other documentation for all of the years covered by your voluntary disclosure. You may view a description of the submission requirements necessary to process your voluntary disclosure at www.irs.gov. Once the examiner has all the information needed to certify your voluntary disclosure, most cases should be completed expeditiously. The 2011 OVDI will operate on a first-come, first-served basis. As a result, complete submissions coming in before the final deadline are likely to close much faster.

Q29: My offshore assets were held in the name of a foreign entity that I controlled. However, the sole purpose of the entity was to conceal my ownership of the assets, and I intend to dissolve the entity now that I am making a voluntary disclosure. Do I still have to file the delinquent information returns for the entity?

A29: A taxpayer who holds assets through a foreign entity he or she controls, such as a corporation or a trust, is required to file information returns for that entity (e.g., Form 5471 for a foreign corporation and Forms 3520 and 3520-A for a foreign trust), regardless of whether the taxpayer honored the form of the entity in his or her dealings with the assets. However, in cases where the taxpayer certifies under penalty of perjury that the entity had no purpose other than to conceal the taxpayer’s ownership of assets, and where the taxpayer dissolves the entity, the Service may agree to waive the requirement that delinquent information returns be filed if it concludes it is in the Service’s interest to do so. Taxpayers wishing to request the Service to disregard a foreign entity should submit a Statement on Dissolved Entities.

Q30: What should I do if I am having difficulty obtaining my records from overseas?

A30: If you are having difficulty, speak with your agent or if your case is not yet assigned, contact the IRS OVDI Hotline at (267) 941-0020. Our experience with offshore cases in recent years has shown that taxpayers are ultimately successful in retrieving copies of statements and other records from foreign banks.