IRS Streamlined OVDP: Your Top Questions… Answered
by: Anthony Parent
The IRS Offshore Voluntary Disclosure Initiatives (OVDI) and Programs (OVDP) started with the 2009 OVDI. Now, with the 2014 OVDP rules still in place, we find liberalized new rules for Streamlined OVDP. Watch our webinar, found below.
There are numerous benefits over the Standard OVDP program. Both the "domestic" and "foreign" offers are for those who have not willfully avoided paying taxes or not filed their FBAR/FinCEN Form 114 (or other foreign reports). Those who make out the best are those who can file under the foreign streamlined rules as they are subject to a 0% penalty. Those who live domestically in the US are subject to a 5% penalty on the highest year-end value. But unlike the Standard OVDP, the penalty base does not include rental real estate.
Not only can the Streamlined OVDP cure errors like missing FBARs, but also foreign reporting forms like Forms 3250, 3250-A, 5471, and 8865.
The Streamlined OVDP process
When going through the Streamlined OVDP process we start off with a Standard OVDP pre-clearance. Unlike a Standard OVDP, there is no Form 906 notifying you of completion, but there is a notice the IRS will send to indicate your changes have been accepted.
Audit of Streamlined OVDP
Many people want to know "what happens if I get audited after I submit a Streamlined OVDP?" As long as you did not lie on your non-willfulness certification, you should be treated no worse than someone who filed a Standard OVDP and opted-out.
Streamlined OVDP: Are you willful?
Some people have been misinformed as to whether or not they are willful. CPAs and attorneys routinely give people wrong advice simply because they don't know, but they want to appear as if they know. A second or third opinion on willfulness is never a bad idea.
Who can file a Streamlined OVDP
The Streamlined OVDP is open to non-willful taxpayers who have failed to report income overseas. It is also open to estates of those who have passed. Individuals and estates who own Controlled Foreign Corporations, partnerships or trusts may also take advantage of it. US corporations or trusts with undisclosed assets can not use the Streamlined OVDP, but rather must use the Standard OVDP.
Can you still file Streamlined OVDP if you have a bank account in OVDP FAQ 7.2?
If your bank is a listed bank in OVDP FAQ 7.2 and subject to the 50% penalty under the Standard penalty, you may still use the Streamlined OVDP as long as you are non-willful. The IRS has said that they will start blacklisting certain bank account holders from Streamlined OVDP eligibility, however that has not happened yet.
OVDP trends from around the world
Tax treaty treatment is essential to consider prior when amending returns as there could be huge consequences. Foreign taxation is difficult to get right, but with a team you are comfortable with, you can get it behind you and rest comfortably. Contact us if you need assistance. Call us at 888-727-8796 or email email@example.com. Any information you share with us will be kept confidential.