Demystifying the Offshore Voluntary Disclosure Program
The Offshore Voluntary Disclosure Program (OVDP) was a program created by the Internal Revenue Service (IRS) to allow US taxpayers who had undisclosed foreign financial accounts to come into compliance with US tax law.
The OVDP was closed on September 28, 2018, but the IRS has since offered the streamlined filing procedure program for taxpayers who are in the same situation.
Understanding the Offshore Voluntary Disclosure Program (OVDP)
The OVDP was a voluntary disclosure program that used to allow US taxpayers to come into compliance with US tax law by disclosing previously undisclosed foreign financial accounts. The OVDP was designed to be a more lenient alternative to criminal prosecution for taxpayers who had failed to report their foreign financial accounts.
To participate in the OVDP, taxpayers had to meet certain eligibility requirements. These requirements included:
- Taxpayers had to have undisclosed foreign financial accounts.
- Taxpayers had to have failed to report their foreign financial accounts on their U.S. tax returns.
- Taxpayers had to pay a significant penalty.
- Taxpayers had to cooperate with the IRS.
The OVDP was a complex program, and there were many different rules and procedures that taxpayers had to follow.
Differences between the OVDP and Streamlined Filing Procedures
The streamlined filing procedure (Introduced in 2012 by the IRS) is a much simpler and less expensive option than the OVDP. To qualify for the new streamlined filing procedure, taxpayers must meet the following requirements:
- Taxpayers must have unreported foreign financial accounts.
- Taxpayers must have failed to report their foreign financial accounts on their U.S. tax returns.
- Taxpayers must have had no willful intent to violate US tax law.
- Taxpayers must pay a penalty of 5% of the highest aggregate balance of the foreign financial accounts.
- Taxpayers must file all required US tax returns and pay all taxes due.
- Taxpayers must certify that they will not engage in future tax evasion.
The streamlined filing procedure is a much more attractive option for many US expats who have undisclosed foreign financial accounts. The program is simpler, less expensive, and does not require taxpayers to admit to willful intent to violate US tax law.
Need Help Getting Caught Up on Your Late US Expat Tax Return?
Our team of dedicated CPAs and IRS Enrolled Agents are here for you. We can help make the process of getting caught up a more hassle-free experience with the expertise you’re looking for in a tax professional. Get started with us today!