How are Willful Violations Defined for OVDP?
OVDP Willfulness With offshore disclosure, OVDP willfulness prevents a person from submitting to the IRS streamlined procedure. Why? Because, if a person is willful when it comes to non-compliance of offshore accounts they cannot meet the non-willful requirement for going streamlined. Therefore, they instead submit to traditional IRS voluntary disclosure.
What is OVDP Willfulness
OVDP willfulness disqualifies a person from the IRS streamlined program. In other words, if a person is willful, they are no longer eligible to apply to the Streamlined Procedures. Instead, they have to apply for the newly revised (2019) Offshore Voluntary Disclosure Program which was transitioned into the traditional voluntary disclosure procedures. These same procedures are used for either offshore or domestic applicants — but have different reporting requirements.
What is OVDP?
OVDP is the traditional voluntary disclosure program. It commenced in 2009 as OVDP (Offshore Voluntary Disclosure Initiative) and was then rebranded OVDP (Offshore Voluntary Disclosure Program) until 2018, when the program ended. Even though OVDP ended, the program was transitioned into the traditional voluntary disclosure program in 2019, and updated accordingly.
The stand-alone Streamlined Program did not come about until 2014. Prior to 2014, if a person was willful or non-willful, they still had to submit to OVDP (or OVDI). When they were non-willful, they would then “opt-out” to prove their non-willfulness. This was a massive undertaking, primarily because most IRS agents took the baseline position that the applicant must be willful if they were applying to the program — although many times this was simply not the case.
How Do I Know if I was Willful?
Many newer attorneys who falsely claim to be specialists, misunderstand OVDP willfulness, and put the client into a much worse position than they were in before they started. We have been retained by clients, CPAs and other professionals to help many of these clients avoid the harsh penalties of OVDP (when OVDP was not warranted).
It is a costly and time-consuming undertaking for the client, and oftentimes could have been avoided from the outset.
Lack of Knowledge or Intent can Still be Willful
The IRS does not conclusively define willfulness, and there is no bright-line test. Essentially, it means a person does not qualify as “non-willful.” To confuse the issue further, willfulness does NOT mean acting with intent, or even with actual knowledge.
There is no clear-cut definition of the term Reckless Disregard. It is considered a lower-level form of willfulness, which does not require intent. In the context of offshore disclosure, whereas negligence is simply not knowing or being aware of a foreign account or asset reporting requirement, reckless disregard is more than that. It presumes that the person should have known.
For example: David hires a CPA. Before going to the CPA, David speaks with his buddy Scott (who has no tax background). They get to talking about taxes, and when asked about whether he should tell his new CPA about foreign accounts, Scott says probably not – since David is filing U.S., not foreign taxes. David never mentions the foreign accounts to the CPA, even though they are on David’s mind, and he kinda, sorta thinks he may have to report. This may be considered reckless disregard (other facts may modify the outcome).
Back to law school 101.
Here is a simple example: Jennifer is with her girlfriends for a trip to Mexico. She is approached by a stranger and asked to drive a car past the border and into southern California. The stranger offers $1,000,000 cash. Jennifer (with her buddies in tow) ask no questions and get to driving. They are pulled over, and the cops find 50 pounds of cocaine.
Jennifer’s defense was simple: She never knew there were drugs in the card. Despite having no actual knowledge, the mere fact that a stranger asked Jennifer to drive 3 hours for $1,000,000, and Jennifer asked no follow-up questions may lead the court to find that she was willfully blind and intentionally did not inquire about the nature of the drive – when any reasonable or prudent person should have inquired.
IRS Streamlined Procedure Requires Non-Willfulness
In order to qualify for the Streamlined Program, a person MUST be non-willful. While the foreign and domestic programs each have their own set of specific requirements — non-willfulness is an absolute must – especially since the applicant submits to the program under penalty of perjury.
We Specialize in Streamlined & Offshore Voluntary Disclosure
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Our lead attorney is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about our Firm?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
We specialize in FBAR and FATCA. Contact our firm today for assistance with getting compliant.