What is the OVDP?
OVDP stands for Offshore Voluntary Disclosure Program. It’s an initiative that gives taxpayers an opportunity to disclose the bank accounts and assets they have in a foreign country. We’ll explain the program further by focusing on the elements of its name.
Offshore – Offshore doesn’t mean having a bank account in an exotic island. Offshore is not a bad word. It simply means that the money is abroad.
Voluntary – This means that you must apply for the program out of your own will. You cannot submit an application if you are under an IRS audit or investigation. Once you are under an audit or investigation, you are required to disclose previously undisclosed bank accounts even if the IRS officer didn’t ask about them specifically.
Disclosure – This means full disclosure. Once you decide to go the OVDP way, you should be prepared to fully disclose all the information you have regarding your money abroad. This applies even if the institution or the branch in which you kept the money went out of business. It also goes for any anonymous accounts that you firmly believe can’t be traced back to you.
Program – This is an IRS approved program with a schedule. Once you decide to take this route, you should be ready to meet the deadlines for the three stages of the program. Failing to meet the deadlines will result in IRS removing you from the program, which would be quite unfortunate. In such a situation, IRS has some information regarding your money abroad, allowing them to impose exorbitantly high fines on you while you wouldn’t have the protection of the OVDP.
What are the benefits of the OVDP?
The OVDP provides taxpayers protection from criminal liability and reduced penalties that are not available to those that are facing examination or criminal investigation.
What is foreign tax credit?
When you enter the OVDP, you will be required to disclose all of your foreign income and foreign bank accounts. However, you may be eligible for a foreign tax credit. This is a credit that you can receive for the taxes that you have already paid abroad. However, the tricky part is that the United States taxes you on your worldwide income. People often get confused, because they believe it’s enough if they pay the taxes in the country where the money is.
The OVDP is one of the fastest ways to get into compliance. Once you start amending your tax returns, you will have an opportunity to list the foreign taxes you paid. Foreign tax credit can help significantly reduce your tax liability.
Why should you choose an experienced tax lawyer to represent you in the OVDP?
The OVDP is incredibly complex. Whether or not it is the right option for you is something that only an experienced attorney, specializing in tax law, can determine. With a seasoned tax lawyer at your side, you will be sure that you have hired a professional who can navigate the process regardless of the course it takes.
When you are considering tax lawyers’ services, compare potential attorneys based on their experience in attorney practice, litigation, and IRS audits and whether or not they specialize in tax law. Bear in mind that hiring an attorney to help you safely get into compliance will give you the benefits of attorney-client privilege. However, this privilege cannot go back to cover the time before you hired the lawyer and disclosed potentially incriminating information to a CPA or Enrolled Agent.
If you want experience-powered results, call Brunoro Law
Brunoro Law serves clients in the United States and around the globe in all matters regarding tax law and business transactions. If you are thinking of applying for the OVDP, don’t hesitate to book your free, 1-hour consultation with an experienced tax lawyer. Note, however, that the consultation doesn’t form attorney-client relationship. We are eager to help you safely get into compliance. Reach out to us!