The Choice of Opting Out of the OVDI, the Advantages and Disadvantages, and the Policies and Requirements Which Apply
(PRWEB) July 24, 2013 -- The Offshore Voluntary Disclosure Initiative (OVDI) is a program where holders of foreign-based accounts submit undisclosed information to the IRS. Those with dual citizenship are usually the ones who make use of it.
Anyone who has participated in the program knows that there is a required amercement of a significant percentage, as mandated by the IRS.
Due to this, taxpayers are torn on the certainty of being subjected to maximum penalties based on guidelines and reasonable cause exceptions. It is not clear if IRS agents will impose such penalties accordingly.
The penalty happens to be too high for a lot of people. The amount entailed by the percentage causes distress and participants often look for another option. And a lot have considered opting out.
Click here to know more about the OVDI.
The Choice to Opt Out
Would opting out be a wise choice? Many seem to think so. But consider this: As of 2009, the OVDI 20% penalty doesn’t distinguish between taxpayers who’ve acted willfully and those who haven’t. And in 2011, the penalty has been raised to 25%.
This had been stated under the Opt-Out and Removal Guide contained in the IRS website. Taxpayers must take into account the following things:
Auditing on a full scale may be a requirement
The taxpayer may have to put up with any applicable penalty
Penalties which the taxpayer may be subjected to are stated in the IRS’s Frequently Asked Questions. Moreover, he or she must submit a memorandum to an IRS agent, stating facts and valid recommendations, as well as a summary of penalties which may apply.
Click here to know more about the steps to undertake in opting out.
Opting Out and the FBAR
The IRS also provides guidelines on the advantages and disadvantages of opting out. The taxpayer being willing to opt out and be subjected to the “willful” penalty has to be taken into account.
As of October 2004, the FBAR penalty of the above is greater than (a) $100,000 or (b) 50% of the amount in the account at the time of the violation.
- Starting from the date of violation, the Statute of Limitation on the assessment of the FBAR policy is 6 years.
- If no extension has been granted, such would be considered as “lapsed” and additional fines may apply.
The “willfulness” of the taxpayer must first have to be proven. The taxpayer has to be aware of the requirements concerning the subject matter and has deliberately violated any of them.
A “non-willful” penalty was added in 2004 when amendments for the Bank Secrecy Act (BSA) were made.
- The penalty will not exceed $10,000 for violations after October 22 of the given year.
- Such amendment adds that there has to be a reasonable cause for exception.
IRS provided mitigation guidelines, requiring both willful and non-willful penalties require the taxpayer to adhere to certain policies.
Click here to know about what these policies are.
If the maximum aggregate balance of non-willful penalties for all unreported accounts is not greater than $50,000 at any time during the year, a $500 penalty--not exceeding $5,000--is imposed.
Perfect Tax offers several other strategies in order to help taxpayers lower FBAR penalties, as well as regular taxes.
The firm affords unique guarantees for all services, such as a 200% money back assurance for error of law point--if any--in tax planning and a 125% money back if all other CPAs are able to lawfully reduce even down to $1 in tax worked out by the organization.
Contact Perfect Tax by emailing info(at)helpfortax(dot)com or by calling 469-828-0829 for more details.
Sam Thakkar, Perfect Tax, http://www.perfecttax.com, 1-888-671-0829, [email protected]
Share this article