Greenback Case Study: Filing for the Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program (OVDP) is one of two IRS amnesty programs designed to help delinquent filers become compliant with their US tax obligations.  The main goal was to lure tax evaders out of hiding and report their previously undisclosed foreign assets. While the main purpose of the programs’ creation was to uncover tax cheats, this also provided an opportunity for innocent expats (who didn’t know they needed to file) to become compliant.

Meet John

One of Greenback’s expert accountants recently worked with John, a customer who decided to file under OVDP prior to working with Greenback. John was an American working overseas but was no stranger to the expat lifestyle. He resided in Switzerland and Singapore for many years–and unfortunately he didn’t realize he needed to continue filing his US taxes while abroad. He had not filed in many years and was severely delinquent.

But there were options for him to get caught up. The IRS amnesty programs were available and OVDP was enticing, as the IRS offers reduced penalties and for most, protection from criminal prosecution for those who enroll. However, OVDP does impose the largest penalties of any IRS program, as those accepted into the program generally owe significant amounts of tax. In comparison, those who file under the Streamlined Program are generally low-risk filers with little or no tax liability, and they incur much lower penalties (if any).

Prior to coming to Greenback, John enrolled in OVDP without seeking advice from an expert tax accountant or attorney. Filing under this program is not a simple process but John felt it was imperative that he get caught up immediately. His decision was made quickly and without a full understanding of the differences between the programs. While this may or may not have been the best option for him, he was already enrolled and moving through the process.

John hired Greenback to help him file the required documents: eight years of tax returns and FBAR forms.

The OVDP Experience

Understandably, he was nervous about the process. The letter from the IRS confirming his participation in the program was received right at the extended deadline so he was forced to move quickly. John had the daunting task of compiling tax information for eight years, including tax documents from four different countries.  He was very anxious but his Greenback accountant assured him they would resolve these issues and file all necessary returns and documents in the time frame required. His accountant walked him through each step, outlining exactly what documents he needed to gather and how best to do so.

After six weeks of intensive work with his accountant, John was successful in submitting all required documents to the IRS. While he was now compliant with his US taxes, enrolling in OVDP resulted in some hefty payments to the IRS. Because he had received a large sum of money from his pension when he left Switzerland, he had a significant unpaid tax liability. In addition, John incurred the maximum penalty under OVDP, which is 27.5% of the highest balance in his accounts.  Not every expat will incur the maximum penalty, however, as every situation is completely unique.

John has continued to work with Greenback, diligently filing his US tax returns each year.

Conclusion

John’s story is not unique—there are thousands of US taxpayers living abroad who are delinquent on their US taxes. Greenback strongly advises speaking with an expat tax professional prior to enrolling in any IRS amnesty program. It is important to carefully evaluate your personal tax situation and choose the program best suited for you. This will help mitigate your potential tax liability and ensure you become compliant while paying the least amount of money to the IRS.

Would you like more information on the Offshore Voluntary Disclosure Program?

If you would like to learn more about the IRS amnesty programs, the Streamlined Program and the Offshore Voluntary Disclosure Program, please read this informative article. If you would like one of our expert accountants to help you get caught up, register right here!

Free Guide: The 25 Things Every Expat Needs to Know About Taxes

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