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OVDI FBAR Use It or Lose It

The IRS has announced a reopening of its 2011 offshore voluntary disclosure initiative (“OVDI”). This program will have essentially the same terms as the 2011 OVDI, but with a penalty rate of 27.5 percent (rather than 25 percent) of the highest account balance during the period covered by the initiative.

The program requires filing eight years of amended tax returns and unfiled FBARs and the payment of tax, interest and a possible accuracy-related penalty on unreported income as well as the above-mentioned lump-sum penalty. In certain cases, a reduced penalty for failure to file FBARs is available. Unlike the prior initiatives, the reopened OVDI has no deadline; however, the government can always choose to impose a deadline or terminate the program at its discretion.

As in the past, yesterday’s move follows a carrot-and-stick approach in which the IRS announces an opportunity for delinquent filers to come clean, but only after the government first announces major enforcement actions. Although the relatively small increase in the penalty amount provides good news for taxpayers who are thinking of coming forward, the initiative nevertheless continues the unfortunate pattern of treating all disclosing taxpayers similarly, without regard to willfulness in failing to meet their compliance burdens. This one-size-fits-all approach seems particularly harsh in situations involving minimal tax liability or otherwise sympathetic facts.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

By Lance Wallach, CLU, CHFC
Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies. He is an American Institute of CPA’s course developer and instructor and has authored numerous best selling books about abusive tax shelters, IRS crackdowns and attacks and other tax matters. He speaks at more than 20 national conventions annually and writes for more than 50 national publications.

Copyright Lance Wallach, CLU, CHFC

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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