The IRS announced the 2014 Offshore Voluntary Disclosure Program yesterday. Per the IRS the 2014 OVDP is a continuation of the program introduced in 2012 with modified terms. The modifications included several changes to the OVDP and other voluntary disclosure programs designed to allowed more people to disclose foreign held accounts by lowering penalties and eligibility requirements.
However, the IRS has lit a fire meant to increase disclosure of your accounts. The IRS has increased penalties for those guilty of “willful” non-compliance to 50% of highest account balance for the accounts at issue in specified circumstances. This penalty is up from the former “one size fits all” penalty of 27.5% on aggregate offshore account or tainted asset balances greater than $75,000.
What are the Penalties for “Willfully” Failing to Report Foreign Bank Assets?
What does this mean for you? If the IRS finds that you “willfully” failed to disclosed foreign financial accounts by failing to file a Report of Foreign Bank and Financial Accounts (FBAR), the IRS will penalize you 50% of the highest account values of your undisclosed foreign accounts with the new 2014 OVDP Program!
Tax Attorney and CPA, David W. Klasing, recommends that holders of undisclosed offshore accounts with unreported income get out of the cold and get an offshore disclosure in front of the IRS before July 1st. Every day, new countries and banks are signing on to the Foreign Account Tax Compliance Act (FATCA), and the IRS is still aggressively pursuing tax evaders. Time is running out. Beginning August 4th, you will be subject to the 50% penalty if:
- Your offshore financial institution is announced to be under investigation by the IRS,
- Your offshore financial institution is cooperating with the IRS to help them locate tax evaders, or
- Your offshore financial institution has been identified in a court approved summons requesting information about U.S. taxpayers holding accounts with said institution.
Waiting to file your Offshore Voluntary Disclosure can lead to penalties almost double the current penalties. Most of the modifications to the 2012 OVDP (or what is being colloquially referred to as the 2014 OVDP) take effect on July 1st; however, there is still a small window before the penalty increases. Do not let this small window of time slip past before you face the potential 50% penalty. After August 4th, you will still be eligible for OVDP if your offshore financial institution has not yet disclosed to the IRS, however, the risk is huge.
The IRS has published a list of banks and promoters whose clients may no longer be eligible for OVDP. As of June 18th that list consists of:
- UBS AG
- Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
- Wegelin & Co.
- Liechtensteinische Landesbank AG
- Zurcher Kantonalbank
- swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
- CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
- Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
- The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
- The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
David W. Klasing counsels that due to the recent wave of countries and financial institutions signing on to comply with FATCA, and all of the information regarding foreign accounts held by U.S. taxpayers becoming available to the government, the above list will continue to grow exponentially. It seems that U.S. taxpayers are racing against two clocks.
First, U.S. taxpayers must make a noisy disclosure of their offshore assets before their financial institution discloses them. Secondly, U.S. tax payers should disclose before they become subject to increased penalties.
In a time where federal tax law and penalties are changing so quickly, Klasing recommends that anyone concerned with offshore disclosure consult a qualified professional immediately. At the Tax Law Offices of David W. Klasing, we have the tax, legal, and accounting expertise to walk you through the disclosure process from start to finished entirely under one roof. Whether the IRS has already come knocking at your door, or recent news has made you worried about your hard earned assets, we can help you avoid prison time and minimize the impact on your wealth. Don’t wait until the IRS finds you. Call us today.
