Although most practitioners are familiar with the IRS’s Offshore Voluntary Disclosure Program (OVDP), very few are comfortable with it.
The Foreign Account Tax Compliance Act (FATCA), P.L. 111-147 requires foreign financial institutions to report on their accounts held by U.S. taxpayers. More than 77,000 foreign financial institutions have already signed on in the initial round of registration. In addition, at least 39 nations have signed on, which means the financial institutions within their borders will be either permitted or required to report to the federal government on their U.S. account holders.
As most people are aware, the penalties for noncompliance are huge (50% of the highest account value per year).
The good news: IRS has recently expanded a streamlined reporting program, in which taxpayers can voluntarily come forward and pay a much smaller penalty of 5% for all years combined.
The bad news: If you are already under investigation by the IRS, this program is not available to you. Now is the time to act, because once IRS gets your name from the financial institution and opens an investigation, it will be too late.
If you have foreign accounts and believe that you may not be in full compliance with the federal reporting requirements, please contact us to find out if you qualify for the IRS’s new streamlined voluntary disclosure program and, more importantly, if you qualify for the reduced penalty.