Participating in the Offshore Voluntary Disclosure Program is an important opportunity at a second chance. Though you may have made some poor judgments in regards to your financial dealings in the past, you’re ready to come clean and start fresh. This is exactly why it’s so important to get the process right. Misunderstanding the guidelines, missing details, or committing errors of any kind during the process can lead to trouble, and it could look like you’re deliberately omitting or editing certain pieces of information.
By taking the time to make sure you fully understand the process, you are fully taking advantage of this important second chance. Here are a few common points of confusion when it comes to participating in the Offshore Voluntary Disclosure Program, and how to avoid getting tripped up by them.
Submit the correct tax returns
You typically have to provide three years’ worth of amended tax returns during the process. Typically, this is for the three most recently filed returns, but depending on timing, you may be able to submit your new return for the current year (if you are processing during the typical tax season), and then two amended returns. Talk to your accountant if you’re unsure of where you fit into this window.
Get the ball rolling on time
Have you received a Foreign Account Tax Compliance Act letter? If so, your misdeeds might not be as cleverly hidden as you had thought. That letter means that the foreign financial institution you’re dealing with is aware or suspects that something is up, and it won’t be long before they report the situation to the IRS. If you receive such a letter, get ahead of the process and begin the Offshore Voluntary Disclosure Program procedures immediately. Or better yet, begin before you get that letter, even if you don’t think you’ll ever be caught. It’s the safer bet and the right thing to do.
Paying your taxes doesn’t get you off the hook
You may have paid all appropriate taxes on foreign funds and assets, but that doesn’t put you on safe ground if you haven’t disclosed all of that information on your American tax return. Disclosure of all foreign investments and assets is mandatory, and not doing so can land you in trouble, even if foreign taxes were appropriately paid. If you haven’t disclosed all the details—even if you otherwise have a clean conscience—talk to your accountant or legal counsel about submitting to the Offshore Voluntary Disclosure Program.
Know what accounts and assets must be disclosed
You’ll need to work with your accountant and legal counsel on this one. Though it’s a safe assumption that all foreign accounts should be reported, there are a few areas that many people don’t realize fall into the mandatory reporting category. Work with the professionals on your team to make sure you have all your bases covered.
Know the reality: you’re not guaranteed to get off easy
Though the Offshore Voluntary Disclosure Program is designed to give you the option to come clean to avoid criminal convictions for failing to report foreign assets, and though this is the case for most program participants, there is no guarantee that you won’t be held criminally responsible. If your actions breech the parameters of the program, or if you hold anything back during the disclosure process and provide incomplete information, you run the risk of a criminal conviction. This is why it’s so important to be entirely forthcoming, and to rely on your accountant and legal counsel to ensure you’ve covered everything and followed the process correctly.
Deciding to participate in the Offshore Voluntary Disclosure Program isn’t easy. It means admitting wrongdoing and going through a great deal of work to right your wrongs. If you’re going to go through the process, make sure it’s worth your while. This means taking the time and taking care to make sure that you fully understand every aspect, that you’re clear on the details, and that you don’t miss anything. If you have any questions or are uncertain, it’s important that you seek the guidance of an accounting or legal professional to clear things up so you can ensure you don’t encounter any trouble.
The Offshore Voluntary Disclosure Program is your chance to make things right. Take all the advice you can to make sure the process is worth your while.