In light of the success of the IRS Offshore Voluntary Disclosure Program (OVDP), the U.S. Senate Permanent Subcommittee on Investigations requested a detailed analysis and profiling of the participants. Upon receiving the request, the Government Accountability Office (GAO) investigated the results of the OVDP program and compiled a detailed report. Released in February, the GAO report on the origin of offshore account holders who participated in the (OVDP) revealed a wide variety of participants.
OVDP & California
The International Tax Team at LSL CPAs believes the results of this investigation reveal the growing number of American taxpayers in need of help. Given the higher level of income of the majority of participants, certain states had a much higher representation than others. In particular, higher-income states, such as California, Florida, and New York, had a higher percentage of participants using the OVDP than the majority of other states.
Since California was included, clearly more Californians will need help with offshore accounts before the IRS uncovers these undisclosed foreign financial holdings. The international tax team at LSL CPAs has the experience needed to put offshore accounts in order before they are disclosed.
The Point of OVDP
The point of the OVPD is to offer reduced penalties for taxpayers who come forward and disclose their offshore accounts and pay taxes on previously non-reported income. Although penalties are only partially reduced, the program offers no risk of criminal prosecution for the participants. This is why it is so important to take advantage of the OVDP while it is still available.
12,889 FBAR forms were filed in 2008 in total. As of December 2012, the OVDP has resulted in more than 39,000 disclosures by taxpayers and over $5.5 billion in revenues for the IRS. At the end of the report, GAO recommends the IRS:
- Employ offshore data to help identify and educate taxpayers who might not be aware of their reporting requirements
- Explore options to more effectively detect and pursue quiet disclosures that generate revenue without generating problems
- Analyze first-time offshore account reporting trends to identify strategies of offshore evasion to help ensure future compliance
Since the IRS agreed with all of the GAO recommendations, the emphasis of the Internal Revenue Service on collecting tax debts on undeclared offshore accounts is just beginning. As a direct result, if you have been sitting on your hands and hoping the problem would just go away, the time to take action and pick up the phone to access quality help is now. If you need help with foreign accounts and avoiding IRS tax problems, please contact the foreign tax team at LSL CPAs in Orange County.
Pursuant to U.S. Treasury Department Regulations, any federal tax advice in this article is not intended or written to be used for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.
It is important to further note that this article presents only a partial view of the subject matter. It does not claim or attempt to be comprehensive or perfectly accurate. To learn more about how these issues might apply to your particular international accounts or financial holdings, please call LSL CPAs international tax accountant Yana Weaver at 714.569.1000.
