Understanding the Basics of OVDP 2012

The IRS started an open-ended Offshore Voluntary Disclosure Program (OVDP) back in January 2012 and may end it at any given time in the future. The IRS is providing individuals with undisclosed income from overseas accounts a chance to get current with their tax returns. The 2012 OVDP comes with a higher penalty rate than any other programs but provides benefits to encourage taxpayers to disclose foreign accounts instead of risk detection by the IRS and probable criminal prosecution.

Objective of OVDP

The objective of OVDP 2012 is the same as 2009 and 2011 i.e. to bring those taxpayers who have utilized undisclosed foreign accounts and foreign entities to evade taxes into compliance with the U.S tax laws.

Reasons to make a Voluntary disclosure

Taxpayers having undisclosed foreign incomes must make a voluntary disclosure as it helps them to stay compliant, avert substantial civil penalties and eradicate the chances of criminal prosecution and other penalties. An overseas voluntary disclosure also offers the scope to estimate with a logical degree of certainty, the total expense of resolving all overseas tax concerns. Today the IRS is proactively involved in searching out individuals who have undisclosed foreign accounts and the information is available to the IRS under tax treaties.

In order to aid the situation tax planning agencies today offer taxpayers with a comprehensive insight into the tax codes that is applicable to resident individuals in the U.S comprising US Citizens and Green Card Holders. It also helps the taxpayers and other individuals with the following:

• Complete compliance
• Consultation and impact analysis
• Planning and analysis to minimize FBAR Penalty
• AMT Strategies
• Foreign Tax Credit
• A review of 2009, and 2010 OVDI cases
• Mutual Fund or PFIC computations
• Form preparations that are required to take part in the OVDP program
• Preparation associated with Tax Amendments and Delinquent FBAR
  

United States residents, citizens and certain other individuals need to annually report their direct or indirect financial interest in or signature authority or any other authority that can be compared to signature authority over a financial account that a financial institution maintains located in a foreign country, in case in a calendar year the total value of all the foreign accounts surpass $10,000 at any time during the year. Typically, the civil penalty for willingly failing FBAR reporting can be as high as $100,000 or 50 percent of the total balance of the foreign account per violation.