February 24, 2013 /24-7PressRelease/
-- Offshore Voluntary Disclosure Initiative
Article provided by Hammond Law Group, PLLC - Tax Resolution Attorneys
Visit us at http://www.protaxcounsel.com
In response to US federal budget shortfalls, the IRS is strengthening its compliance efforts, making it more important than ever for all individuals to comply with US tax regulations. This is especially true for individuals with offshore bank accounts. It is crucial for owners of offshore bank accounts to take a proactive approach to their tax obligations in order to avoid potential criminal liability and other penalties.
Offshore Voluntary Disclosure Initiative contains harsh penalties
The Offshore Voluntary Disclosure Initiative, or OVDI, is an effort by the federal government to collect unpaid taxes and encourage those with offshore accounts to comply with federal tax laws and regulations. The first round of OVDI occurred in 2009, with second and third rounds occurring in 2011 and 2012.
Over $4 billion in unpaid taxes were collected as a result of the first two rounds of OVDI. The program also helped expose over 30,000 offshore accounts.
Individuals who participate in the 2012 OVDI program are required to disclose the names of the banks and bankers who assisted them in avoiding tax liability in the United States.
The 2012 OVDI program contains harsher penalties than the previous versions. There are severe consequences for individuals who willfully fail to reveal information regarding foreign financial activities and offshore accounts.
Civil penalties include fines up to $100,000 or 50 percent of the account's value. Fines may reach as high as $250,000 for those convicted of criminal tax evasion, which is a form of fraud. Criminal penalties also include potential prison time of up to five years.
Even simply failing to file a tax return can result in up to one year in jail and a fine of approximately $100,000. Additionally, although the statute of limitations for criminal tax evasion is six years, there is no statute of limitations for civil tax evasion.
Voluntary disclosure of offshore accounts is a wise choice
There are a number of steps individuals with offshore bank accounts can take to avoid charges of tax evasion. Keep in mind that it is perfectly legal to have bank accounts anywhere in the world, as long as all information is fully disclosed.
All worldwide income must be reported on a U.S. tax return. Individuals living outside the U.S. or paying foreign taxes must still report this information.
Individuals who choose to voluntarily disclose information can avoid the severe penalties outlined above. Fines and back taxes may still be owed, but those who come forward with information can avoid prosecution.
Although it is possible to begin filing complete tax returns now and hope the IRS does not notice past non-disclosures, this is a risky move. If the IRS does notice, it is too late to go back and choose to make a voluntary disclosure.
It is essential for a taxpayer who wishes to come forward and make disclosures under OVDI to do so with the help of an experienced international offshore banking tax attorney. A skilled attorney can help with developing and implementing the best plan of action to achieve the best possible outcome. The attorney can also help a taxpayer take immediate action to avoid potential civil or criminal penalties.---
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