Over 36 Years of Experience handling tax controversies & tax disputes

Boston MA Tax Law Attorney Video

Video Transcript

ATTORNEY GERARD LEVINS: The 2012 Offshore Voluntary Disclosure Program is the third offshore program that the IRS came up with based on the apparent success of the 2009 and 2011 programs. In January 2012, the IRS decided to reopen the third program. If the taxpayer has hidden foreign assets, there's a real urgency for him to consider entering into the 2012 Offshore Voluntary Disclosure Program. There are still taxpayers out there hiding their foreign assets and this program gives them an opportunity to get in to pay their taxes on those unreported assets and also take advantage of civil penalties versus trying to do a quiet disclosure possibly down the road and getting caught and being subject to criminal penalties.

FBAR stands for Report of Foreign Bank & Financial Accounts. It's a treasury form TDF 90-22.1. You're required to file that if at any time during the tax year you have foreign bank accounts or foreign investment accounts that exceed $10,000.

FACTA stands for Foreign Account Tax Compliance Act. It came out of legislation passed in 2010. It created a new IRS Form 8938, which is a statement of specified foreign accounts.

It's not a matter of if the IRS will catch up, it's only a matter of when. With the passage of FACTA and the Full Disclosure starting in January 2014, the IRS will eventually catch most taxpayers, if not all taxpayers, who have hidden foreign assets.

A taxpayer enters into the 2012 Offshore Voluntary Disclosure Program by filing a pre-clearance with the criminal division of the IRS in Philadelphia, Pennsylvania. Once the taxpayer is pre-cleared and accepted, the taxpayer calculates his interest, his penalties, in addition to the taxes on amended tax returns; also calculates the penalty. A taxpayer has an opportunity to opt-out if he feels he was unfairly treated.

What we have to do is calculate what the tax interest and penalties, including the FBAR penalty, would be and in most cases, based on my experience, that is significantly less if he is out of the program. However, if he opts out of the program, the IRS basically states that he will be subject to a full civil examination.