Offshore Voluntary Disclosure Program (OVDP) explained!

Author(s): Alex­ey Man­a­suev The fol­low­ing arti­cle by Alex­ey Man­a­suev first appeared in Advo​cateDai​ly​.com,  Octo­ber 4, 2017. Date: Octo­ber 2017

By law, every U.S. cit­i­zen and U.S. res­i­dent is required to file cer­tain finan­cial dis­clo­sures and U.S. income tax returns (pro­vid­ed cer­tain require­ments are met), regard­less of their place of res­i­dence. On a more fun­da­men­tal prin­ci­ple, all U.S. cit­i­zens resid­ing out­side of the Unit­ed States are expect­ed to com­ply with U.S. law, includ­ing tax law, no mat­ter how com­plex that law is or how fre­quent­ly the law or reg­u­la­tions change. And they do change a lot and often. With the new tech­no­log­i­cal capa­bil­i­ties, enhanced trans­paren­cy, and ever-increas­ing col­lab­o­ra­tion of for­eign finan­cial insti­tu­tions with the U.S. Inter­nal Rev­enue Ser­vice (“IRS”), locat­ing and track­ing of delin­quent U.S. tax­pay­ers out­side of the Unit­ed States is no longer a seri­ous chal­lenge. More­over, since the enact­ment of For­eign Account Tax Com­pli­ance Act (“FATCA”) in 2010, most U.S. coun­ter­parts signed Mod­el I or Mod­el II Inter­gov­ern­men­tal Agree­ments (“IGAs”) with the Unit­ed States and enact­ed domes­tic leg­is­la­tion con­sis­tent with the IGAs. In case of Cana­da, for exam­ple, under cur­rent­ly effec­tive Mod­el I IGA, Cana­di­an finan­cial insti­tu­tions (a term broad­ly defined) are required to report ben­e­fi­cial own­er­ship of cer­tain accounts to the Cana­da Rev­enue Agency (“CRA”) that in turn trans­mits that infor­ma­tion to the IRS. That in turn, makes it almost impos­si­ble to stay off of the IRS’s far-reach­ing radar. In short, igno­rance is not bliss when it comes to tax laws and the con­se­quences of being non-com­pli­ant may be severe. In some cas­es, civ­il penal­ties, quite sub­stan­tial at that, are just the begin­ning of what may end up for delin­quent tax­pay­ers in poten­tial crim­i­nal pros­e­cu­tion in a worst-case sce­nario. And, the clock is tick­ing… and, time is run­ning out for tak­ing a proac­tive approach and pro­tect­ing one’s inter­ests. Delin­quent tax­pay­ers often ask why should they come into com­pli­ance now, after all, the IRS has not been able to “find” them all those years. The answer is sim­ple: com­ing into com­pli­ance vol­un­tar­i­ly and pro-active­ly, under one of the IRS amnesty pro­grams, allows delin­quent tax­pay­ers avoid sub­stan­tial civ­il penal­ties and gen­er­al­ly elim­i­nate the risk of crim­i­nal pros­e­cu­tion with respect to the mat­ters cov­ered under the applic­a­ble amnesty pro­gram. Impor­tant­ly, once in com­pli­ance, the tax­pay­ers can stop wor­ry­ing that one day, the IRS may get to them. If that hap­pens, the delin­quent tax­pay­er los­es all pro­tec­tion that in many cas­es may be oth­er­wise avail­able under one of the amnesty pro­grams .…

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