Statements made by the Commissioner of the IRS late last year indicate that the streamlined version of the Offshore Voluntary Disclosure Program (OVDP) may soon be coming to an end, a move that may make it difficult for a taxpayer with undeclared foreign bank accounts to come forward to avoid spending time in a federal prison. The end of the streamlined OVDP will also bring increased civil penalties for those taxpayers who are found to be in violation of Foreign Bank Account Reporting (FBAR) laws. If you or someone that you know has an interest in a foreign bank account that has not yet been disclosed to the IRS, it is in your best interest to contact an experienced tax attorney, right away.
According to news sources, IRS Commissioner John Koskinen told participants at an international law conference at George Washington University Law School, that the streamlined version of the Offshore Voluntary Disclosure Program would come to an end whenever the IRS felt that taxpayers that may have an interest in a foreign bank account that has not yet been disclosed to the federal government have had a chance to take part in the program. But the sad truth is, taxpayers with foreign undeclared accounts may not have even known that there was a program that they could take advantage of that may help them abrogate the negative consequences that could stem from being convicted of FBAR noncompliance.
To provide a short primer on FBAR and the OVDP, the federal government has long recognized that Americans have been storing money in overseas bank accounts to keep it out of the watchful eye of the IRS. Federal law was established that required U.S. taxpayers to disclose to the federal government any interest in a foreign bank account that had a balance of $10,000 or more at any point in the year. Although that law has been on the books for a long time, IRS (along with Congress) found that there was no way for the U.S. to actually enforce foreign bank account reporting laws. To gain visibility into American accounts overseas, the Department of Justice began prosecuting foreign banks and their officials. Those prosecutions scared many Swiss banks into voluntarily handing American account information over to the U.S. government in exchange for a deferred prosecution agreement. When information on U.S. accounts got in the hands of the federal government, taxpayers left and right found themselves under IRS tax examinations to determine whether they willfully violated FBAR laws. If the government was able to establish that the taxpayer intentionally failed to report the existence of their account, their case would be handed over to the Department of Justice for criminal prosecution. A finding of guilt by a federal court led to taxpayers being sentenced to lengthy stays in federal prison and financially-crippling penalties and restitution orders. The stream of investigations and prosecutions continue today and will for the foreseeable future.
For the past few years, thousands of taxpayers have taken advantage of a program set up by the IRS to avoid the potential for prison time. The OVDP allows taxpayers to come forward, disclose the details of their foreign account, and pay a reduced-penalty to receive a deferred-prosecution agreement. The program is a viable option for many taxpayers with undeclared foreign bank accounts who want to avoid federal prison. But there is a catch: the government may not accept OVDP applicants who are already targets of federal investigations for any tax-related matter. This means that even a taxpayer with who is undergoing a standard federal income tax examination may not be eligible for the streamlined Offshore Voluntary Disclosure Program.
As Commissioner Koskinen mentioned in his statements referenced above, the streamlined OVDP will not last forever. In fact, his statements could be read to mean that the end is relatively near for the taxpayer-friendly initiative. Regardless of whether the OVDP tomorrow or in a year, the take-home is clear: if you have undeclared foreign bank accounts, consult with an experienced criminal tax defense attorney as soon as possible to mitigate any potential negative consequences of an investigation, prosecution, and conviction.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have made assisting taxpayers navigate FBAR laws and OVDP participation a cornerstone of their practice. The OVDP may not be for everyone, but only a tax attorney with copious experience with the OVDP program will be able to analyze your particular situation and determine what action is in the best interest of you and your family. Do not make the common mistake of going up against the IRS alone. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation today and be sure to check out our YouTube channel for more helpful resources.