Tax Evasion and Offshore Voluntary Disclosure Program

Posted on December 3, 2022

Tax Evasion and Offshore Voluntary Disclosure Program

Tax evasion attracts stiff punishment that may include imprisonment. Penalties for tax evasion are harsh, but the IRS offers the Offshore Voluntary Disclosure Program (OVDP) to encourage taxpayers to get back into compliance. The OVDP allows taxpayers to get current with their tax filings without attracting heavy penalty and the risk of imprisonment. The penalties are not entirely forgiven, but are reduced substantially.

The OVDP is the simplest way to get back into compliance for those with unreported overseas assets and bank accounts. As the IRS has become aggressive in its efforts to limit tax evasion, it is in taxpayers’ best interest to look to resolve their case through OVDP. The Foregin Account Tax Compliance Act (FATCA) is getting stronger with the U.S. making agreements with more and more nations.

Last month, the United States made FATCA agreements with the Caymans and Costa Rica. Many European nations have already made agreements to share the information with the IRS concerning financial activities of U.S. taxpayers. Greater transparency is expected to help the IRS catch tax evaders.

Due to FATCA, it will not be easy to evade taxes in the future. The foregin financial institutions in which there is unaccounted money or assets of U.S. taxpayers will also be penalized either for not reporting to the IRS or for not registering to FATCA. In such a scenario, OVDP is an opportunity to get current with taxes without suffering harsh punishment for tax evasion.

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