Offshore Voluntary Disclosure Program
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Court Holds that Willful Failure to File FBAR Standard is the Lesser Standard of Recklessness

On December 2, 2016, the US District Court for the Central District of California found that taxpayers who failed to file a Report of Foreign Bank and Financial Accounts (FBARs) for three foreign accounts, one of which, in the court's view, was intentionally kept secret from all persons except their children, for over a decade were “at least recklessly indifferent to a statutory duty.” Read more about the case here. The court found that the taxpayers were “sophisticated,” pointing to evidence that they ran a successful camera shop, and that they lacked credibility having made several misrepresentations on their failed attempt to apply to the Offshore Voluntary Disclosure Program (OVDP) and for making unbelievable assertions at trial. The court did not apply the heightened standard of willfulness applicable to criminal trials, a violation of a known legal duty, finding that civil trials apply the lesser standard of reckless disregard of a statutory duty....

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More than 100,000 Taxpayers Become Compliant with Reporting and Tax Requirements, Paying more than $10.3 billion in Taxes, Interest and Penalties

On October 21, 2016, the Internal Revenue Service announced the most current data on the success of its Offshore Voluntary Disclosure Program (OVDP) and Streamlined Filing Compliance Procedures (SFCP) programs. For our prior coverage on the OVDP and SFCP programs please see Offshore Voluntary Disclosure Update and Release of “Panama Papers” May Encourage New Wave of OVDP Submissions. OVDP program has existed in several iterations off and on since 2009, and the SFCP was made available to non-willful taxpayers in 2014. The programs encourage taxpayers with undisclosed income from foreign financial accounts and assets to become compliant and current with their tax returns and information reporting obligations. The program allows taxpayers to voluntarily disclose foreign financial accounts and assets and pay lower penalties now, rather than risk detection and face more severe penalties and possible criminal prosecution later. The programs have been successful by...

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Offshore Voluntary Disclosure Update

The Internal Revenue Service (IRS) currently offers non-compliant US taxpayers several different relief programs in which to report foreign assets and/or income and become compliant with US rules related to the disclosure of foreign assets. One option is the Offshore Voluntary Disclosure Program (OVDP).  Another is the Streamlined Filing Compliance Procedures (SFCP).  SFCP is further bifurcated into two sub-programs—one for US residents (Streamlined Domestic Offshore Procedures or “SDOP”) and one for non-US residents (Streamlined Foreign Offshore Procedures or “SFOP”).  Each program has its own set of tailored procedures and eligibility requirements. The critical differences between OVDP and SFCP are: (1) the non-willfulness requirement; (2) the look-back period; and (3) the amounts of penalties the US taxpayer must pay.  Specifically, OVDP does not require the US taxpayer to certify that his or her failure to disclose foreign assets was non-willful.  On the...

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IRS Requires “Whole Story” from Taxpayers Seeking to Qualify under Streamlined Filing Compliance Procedures

The Internal Revenue Service (IRS) recently modified the non-willfulness certification form that individual taxpayers must submit to enroll in the streamlined filing compliance procedures (SFCP).  One requirement under the SFCP is that that the taxpayer certify that his or her failure to disclose foreign assets was not due to willful conduct.  Before the recent change, the IRS only provided minimal direction, which caused it to receive non-willfulness narratives that did not provide adequate information.  This resulted in certifications that were either questioned or rejected. On February 16, 2016, the IRS revised the certification forms to include more robust direction and instructed the taxpayer to draft his or her non-willfulness narrative to include the whole story including favorable and unfavorable facts.  A more detailed analysis of the recent changes can be found here.

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