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For nearly a decade, the IRS had a program known as the Offshore Voluntary Disclosure Program (OVDP) in place to help taxpayers minimize penalties and avoid criminal liability when they voluntarily reported hidden offshore bank accounts. While this was considered by many to be an effective program, the IRS ended it in September of 2018. In November of 2018, the IRS announced what is considered to be the replacement to OVDP. This new program, which is simply called the new Offshore and Domestic Voluntary Disclosure Guidelines, or New OVDP for short, has some significant changes.
Increased Penalties
In the old guidelines, the penalties were dramatically reduced, which offered obvious benefits for those who were considering self-reporting. There are a variety of areas where the penalties are increased under the new rules. One of the most significant is in situations where the IRS seeks to impose a civil fraud penalty based on the tax liability in one or more years. Under the old OVDP program, the penalty on the additional tax was 20% per year. Under the new OVDP, the 75% civil fraud penalty is imposed in the year where the additional tax is the highest.
Six Years of Forms
The new guidelines will now cover a six-year period, which means that the IRS will look at all tax forms for the six years leading up to the year you are disclosing. With this in mind, you will want to take a careful look at these years as well to ensure there isn’t anything potentially damaging that you wouldn’t be prepared to deal with.
Auditors get Additional Abilities
The auditors from the IRS will now be able to, “determine applicable taxes, interest, and penalties under existing law and procedures…” This gives the auditors significantly more discretion than they had before, which could result in additional penalties and other problems. The IRS is also going to allow the auditors to withdraw the preliminary acceptance of a deal made on the situation, which can cause serious complications in a case.
Never Take Action Alone
It has always been important to work with an experienced tax attorney when dealing with the IRS. Due to these new, less favorable, guidelines from the IRS, however, this has become even more critical. Making any type of error during this process can end up costing you huge amounts of money in penalties, and possibly even criminal charges. If you have offshore or other accounts that should have been reported to the IRS but weren’t, please contact us right away. Remember, never talk to ANYONE other than a tax attorney about this situation as you won’t be protected by attorney-client confidentiality.
Weisberg Kainen Mark, PL
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