Oftentimes, a business or individual taxpayer has already discovered and needs to correct past errors. Increasingly, the context for remedying past tax-noncompliance is through an IRS established voluntary disclosure program. The IRS offers voluntary disclosure programs for domestic and offshore non-compliance. Both types generally involve disclosing the past non-compliance and agreeing to pay back tax, interest, and modified penalties. The key advantage of entering a voluntary disclosure program is that doing so greatly reduces the prospect of a criminal investigation.
The IRS’s voluntary disclosure programs have become especially prominent as a result of the government’s increased efforts to identify and hold accountable individuals holding unreported offshore financial accounts or assets.
Through the IRS’s Offshore Voluntary Disclosure Program (OVDP), taxpayers can correct past reporting and taxpaying non-compliance, and pay penalties generally lower than those that would apply in the normal course, while reducing the likelihood of criminal investigation. While it is comforting to know that the OVDP exists, determining whether it is the best path forward, gaining entry into the OVDP, and complying with the requirements of the program once admitted are difficult and important steps.
For instance, taxpayers must submit extensive documentation to the IRS, amend previous years’ tax returns, and compute penalties based on the value of specific offshore assets. To assist in this process, the IRS has published guidance in the form of frequently asked questions. While this guidance is helpful, it does not cover everything. The attorneys at Fuerst Ittleman David & Joseph have extensive experience in assisting taxpayers with offshore voluntary disclosures and, through this experience, have gleaned insight into the OVDP beyond the IRS’s guidance. We have shepherded clients with significant and complex offshore holdings through the OVDP to reach successful resolutions of their past non-compliance.
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