The Internal Revenue Service has reopened the very popular and lucrative Offshore Voluntary Disclosure Initiative (OVDI) for an indefinite period, according to the IRS Newswire release on January 9.
If your middle name is “Revenue” and you discover a way to collect an extra $4.4 billion, it is not hard to believe you are bringing back the program responsible – especially when you can raise the penalty rate by 2.5% for future collections.
We have recently written other articles about the OVDI and have been following this situation closely, because it affects so many people living in California, including many who are not even aware they are subject to taxes on offshore bank accounts and other overseas assets.
The new version of the OVDI does not have a set cutoff date, yet, like the previous two offshore initiatives, but it also does not have a permanently set penalty rate, so that could rise without notice.
If you are still not in compliance with the law regarding reporting your overseas assets, you do not want to know how much the penalty rate has risen since the first program in 2009, but you should know that the penalty rate to become compliant will probably continue to rise as the program is extended, as an incentive to motivate you to act sooner rather than later.
The IRS has been extremely focused on this issue for a couple of years, and the program is generating so much new revenue, that the agency will also keep increasing the pressure on all of the financial institutions and mechanisms that assist with hiding assets on foreign soil.
Because of recent federal legislation, overseas banks and financial institutions are forcing account holders who are U.S. taxpayers to either submit the required IRS offshore asset declaration forms or take their money elsewhere.
Soon, there will be no place left to hide illegal foreign assets and the OVDI penalty rates will be even higher, so now is the best time to seriously consider coming clean, because eventually tax rate penalties can turn into criminal penalties. You cannot spend illegal assets while you are in jail.
If you would like a free consultation with Connie Yi, a California tax attorney and a CPA, about your overseas assets, please contact us. We have four conveniently located offices around the San Francisco Bay area.