ATTORNEY GERARD LEVINS: The IRS Offshore Voluntary Disclosure Program is the third program that the IRS has came up with. The first one was 2009, the second one was 2011, and this is 2012. It allows non-compliant taxpayers to come into the system. Non-compliant taxpayers would be those who haven't filed FBARs and have not their reported foreign income.
Taxpayers should enter the Offshore Voluntary Disclosure Program to avoid any potential criminal prosecution. The purpose of this program is to allow non-compliant taxpayers to come into the system, file amended tax returns, report their foreign income, and file delinquent FBARs. By doing so, the IRS more likely will not criminal prosecute a taxpayer.
Taxpayers should consider opting out of the Offshore Voluntary Disclosure Program, especially if there is no criminal aspects to their non-compliance. In addition to that, the Offshore Voluntary Disclosure Program mandates a 27.5% in lieu of FBAR penalty. If the FBAR penalty calculated is less than that, a taxpayer should consider opting out of the OVDP.