On June 18, 2014, the IRS made a major upgrade to its existing Offshore Voluntary Disclosure Program (“OVDP”). While the changes to the OVDP rules are significant, the new rules regarding the Streamlined Procedure maybe even more important.
Here is a summary of the 2014 changes to the 2012 OVDP:
2014 OVDP Update: New Miscellaneous 50% Penalty
The IRS added a new FAQ 7.2 which imposes a 50% offshore penalty on taxpayers who participate in the OVDP if: either a foreign financial institution at which the taxpayer has or had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement has been publicly identified as being under investigation or as cooperating with a government investigation.
I believe that this new penalty is a direct consequence of the successful IRS and DOJ efforts to enforce FATCA overseas, particularly the Swiss Program for Banks. Read this article for more information.
2014 OVDP Update: Elimination of the Reduced Penalty Structure Under FAQ 52 and 53
The reduced 12.5% and 5% penalty structure under former FAQs 52 and 53 has been eliminated due to the expansion of the Streamlined Filing Compliance Procedures. Rather, the new Streamline Offshore Procedure will take over. Special procedures apply to the taxpayer who already entered the OVDP program. I will provide more details in a later article.
2014 OVDP Update: Elimination of FAQ 17 and 18; Procedure is Still Available
This change is just the clarification of the already existing rules. While technically both rules are eliminated, the taxpayer can still use both rules. Read this article with respect to the Delinquent FBAR Submission Procedures (replacing FAQ 17). I will provide the FAQ 18 details in a later article.
2014 OVDP Update: New Streamline Procedure Rules – US Residents are Included
It finally happened – taxpayers residing in the United States now have the option to enter the streamline procedures which were first announced on September 1, 2012. Other major changes include the elimination of the $1,500 tax threshold and elimination of the risk assessment process. I will provide more details in a later article.
2014 OVDP Update: Updated Streamlined Foreign Offshore Procedures
The IRS greatly expanded the eligibility requirements for the U.S. taxpayers who reside overseas. Read this article on the Streamlined Foreign Offshore Procedures.
2014 OVDP Update: Major Changes to FAQ 31-41
These are the important changes that the 2014 OVDP Update made to the calculation of the asset base to which the offshore penalty will apply.
2014 OVDP Update: New Pre-Clearance Procedural Change under FAQ 23
Now, the IRS wants to know more information about you before granting the pre-clearance to apply for the OVDP. The 2014 OVDP Update greatly expands the information required to be submitted under FAQ 23. I will provide more details in a later article.
2014 OVDP Update: Offshore Penalty Must Be Paid With Submission of the OVDP Package
This is a major 2014 OVDP Update to FAQ 7. Now the Offshore Penalty must be paid with the submission of the OVDP Package. Again, I will provide more details in a later article.
Other 2014 OVDP Updates: Procedural Changes
The rest of the 2014 OVDP Update changes are more procedural in nature, but may have real substantive impact. Among them, the changes in the FAQ 25 (requiring the submission of account statements irrespective of the size of the disclosure), new OVDP Letter, new OVDP Letter Attachment, and other technical changes. Once again, I will provide more details in a later article.
Contact Sherayzen Law Office for a Professional Advice Regarding Your Offshore Voluntary Options
The new 2014 OVDP Update presents new opportunities mixed with new traps. It is important to make sure that you get expert advice regarding your Offshore Voluntary Disclosure. This is why you should contact the experienced tax law firm of Sherayzen Law Office. We have helped clients throughout the world and we can help you.