Anthony N Verni – Attorney At Law
The need for an Offshore Voluntary Disclosure Initiative (OVDI) attorney has increased due to the IRS becoming increasingly aggressive in their pursuit of U.S. expats who may not be fully reporting their financial accounts and income derived from those accounts.
As a United States citizen or resident, you may be required to report your interest in certain foreign financial accounts on Form FinCen 114, Report of Foreign Bank and Financial Accounts (FBAR). In addition, a U.S. Taxpayer is required to report his worldwide income, including any income derived from Foreign Financial Accounts, Foreign Financial Assets or income derived from a Taxpayer’s business.
Failure to comply with these filing requirements will invariably result in the imposition of harsh sanctions by the IRS, including additional tax, penalties and interest. In more egregious cases, a U.S. Taxpayer will be subject to prosecution and jail time.
If you are an U.S. expat who is facing tax problems, you need to speak with an OVDI lawyer.
Difference between Tax Avoidance and Tax Evasion
Tax avoidance is taking advantage of legal ways to avoid paying taxes. A good example of tax avoidance is investing in municipal bonds versus putting your money in a savings account. Any interest earned in on a bond is not considered income that can be taxed, on the other hand, interest earned in a savings account is taxable income.
Tax avoidance is legal. Tax evasion is a crime. Tax evasion indicates using unlawful means to avoid paying taxes.
Some examples of tax evasion:
- Failure to consistently worldwide income received by a U.S. Taxpayer;
- Failure to file Federal Income Tax returns which would result in the imposition of a tax liability;
- Repeated exclusion of investment income from foreign investments on the taxpayer’s income tax return;
- Using nominees or shell companies to avoid detection of the existence of Foreign Financial Accounts or Foreign Financial Assets and the reporting of income;
- Having stock in a closely held business held by a non-resident relative, nominee or other person in order to avoid detection and classification as a Controlled Foreign Corporation;
- Diverting foreign income and assets to a foreign non-profit corporation for purposes of avoiding detection by the IRS of the beneficial owner of the income and assets;
- Diverting income and assets to a foreign trust to avoid detection by the IRS;
- Deliberate failure to indicate the existence and location of the foreign account on schedule B of the taxpayer’s income tax return; and
- Repeated failure by a U.S. citizen or resident to file Form FinCen 114 with respect to accounts maintained in a foreign bank or institution with a balance greater than $10,000 at any one time during a tax year.
If any underpayment of taxes is due to fraud, the civil fraud penalty requires the taxpayer to pay 75% of the outstanding tax liability in addition to the tax, other penalties and interest. Depending upon the circumstances, evasion of paying income tax may also include a jail sentence. Tax evasion by expats is serious matter that needs representation from a skilled OVDI lawyer.
How the OVDI Program Works
The OVDI program provides two main benefits to its participants:
- For the majority of U.S. taxpayers, removal of the possibility of criminal prosecution for those that have engaged in tax evasion. This assumes the taxpayer makes a truthful, timely and complete cooperative voluntary disclosure of his or her worldwide income and Foreign Financial Accounts and Foreign Financial Assets, even where criminal tax acts were willfully committed.
- The opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues for years in which the income was not reported and Foreign Financial Accounts or Foreign Financial Assets were not reported.
Non-compliant taxpayers should enter the OVDI program as soon as possible. It is usually a better option than to face the possibility of defending a criminal charge due to non-compliance.
If you are facing issues due to tax evasion or have additional questions about the OVDI program, contact an OVDI lawyer as soon as possible to help you protect your rights.
