Taxpayers that have unreported income and/or assets overseas may gain tax compliance by using the Offshore Voluntary Disclosure Program (OVDP). Under OVDP, taxpayers can pay a lower amount in penalties and face less severe punishment for tax evasion, while becoming compliant with the U.S. tax laws.
The U.S. Treasury loses billions of dollars each year due to tax evasion. The efforts the IRS has made through OVDB are expected to drastically improve this loss. The IRS has been making agreements under the Foreign Account Tax Compliance Act (FATCA) with various countries to improve transparency in the financial transactions U.S. citizens conduct overseas.
A large number of U.S. citizens have disclosed their unreported income and/or assets to the IRS under OVDP. Due to the strict implementation of FATCA, many more are expected to choose OVDP to gain compliance rather than risk the harsh penalties and possibility of imprisonment for tax evasion.
The IRS recently made some changes to certain FATCA rules that were adversely impacting Americans living overseas. These individuals did not comply with tax laws mostly due to lack of knowledge of these laws. In cases such as these, the IRS has reduced the amount of penalty it will charge for the accidental tax evasion. The IRS has also made some modifications to the OVDP to make it easier for taxpayers to become compliant.