IRS Announces New Efforts to Help Offshore Taxpayers Be in Compliance
IRS Announces New Efforts to Help Offshore Taxpayers Be in Compliance
For years the IRS has been trying to track down U.S. citizens’ offshore assets in order to ensure that taxpayers are paying every penny they owe. However, these efforts have often affected many people who had no intention of ever skipping out on their taxes. Many taxpayers have been deemed non-compliant simply because they didn’t understand all the tax rules. There could now be some relief for many of those taxpayers.
That’s because the IRS recently announced some major changes to its 2012 Offshore Voluntary Disclosure Program OVDP. The most significant changes include an expansion of the streamlined filing compliance procedures that were originally announced in 2012, as well as some very important modifications to the 2012 OVDP. The expanded streamlined procedures are intended for any U.S. taxpayer who failed to disclosure his or her offshore assets non-willfully. The penalty in such a case has now been reduced to 5% on non-compliance of form 8938. Originally it was 27.5%. Other changes include:
- No requirement that taxpayers have $1,500 or less of unpaid tax per year
- Eliminating the required risk questionnaire
- Taxpayers no longer have to certify that previous failures to comply were due to non-willful conduct
What Is Non-Willful Conduct?
The main requirement to be consider non-willful compliance is: “Failure to report gross income from a foreign financial asset and pay tax as required by U.S. law and failure to file an FBAR and/or one or more international information returns with respect to the foreign financial asset resulted from non-willful conduct.” So what is non-willful conduct? According to the IRS, “non-willful conduct is conduct that is due to negligence, inadvertence or mistake, or conduct that is the result of a good faith misunderstanding of the requirements of the law.”
What Does it Mean?
Because of these changes, any taxpayer who is eligible for treatment under the streamlined procedures who submits, or has already submitted, a voluntary disclosure letter under the OVDP prior to July 1, 2014, but who does not yet have a fully executed OVDP closing agreement, may now request treatment under the applicable penalty terms available under the streamlined procedures. That means the IRS will now consider this request as it weighs all the facts and circumstances of each taxpayer’s case. The IRS will then determine whether or not to incorporate the streamlined penalty terms in the OVDP closing agreement.
However, be aware that this is not a “get-out-of-jail-free” card by any means. Just because you participate in Streamlined Offshore Procedure that does not mean that you can skirt the system. If the IRS later examines your return and determines that the non-filing occurred due to willful noncompliance then you may be hit with both civil penalties and criminal prosecution. On the other hand, the amended returns that are submitted will not automatically trigger the IRS examination.
Other Important Modifications
There were several other important modifications that were announced. They include:
- Requiring additional information from taxpayers applying to the program
- Eliminating the existing reduced penalty percentage for certain non-willful taxpayers
- Taxpayers must now pay the offshore penalty and submit all account statements at the time of the OVDP application
- Taxpayers can now submit voluminous records electronically rather than on paper
- If it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or Department of Justice, before the taxpayer’s OVDP pre-clearance request is submitted, then the offshore penalty percentage can be increased from 27.5 percent to 50 percent.
We hope you found this article about “IRS Announces New Efforts to Help Offshore Taxpayers Be in Compliance” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or our website at www.GROCO.com. Unfortunately, we no longer give advice to other tax professionals gratis.
To receive our free newsletter, contact us here.
Subscribe our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business. Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most. They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges. Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
Determining The Best & Worst States for Wealthy Retirees Can be Subjective Retirement marks a significant phase in life, offering a new world of opportunities and choices. One critical decision for affluent retirees is selecting the right state to enjoy their golden years. In this post, we’ll explore the 5 best and worst states for…
Chris Maxson, owner of Acucraft Fireplace Systems and Managing Partner, Maxson family’s business ventures discusses igniting innovation in the fireplace industry with Alan Olsen. Below are some of the key aspects of Chris Maxson’s influence on the fireplace industry and his unique approach with Acucraft Fireplace Systems. They indicate the rich legacy and innovation themes discussed.…
The Best Accounting Jokes for Financial Experts in 8 Laughs & Ledgers: Welcome to the lighter side of accounting! Yes, you read that right. While debits, credits, and balance sheets are serious business, who says accountants can’t have a sense of humor? Today, we’re diving into the funniest accounting jokes that even your auditor can’t…