OVDP vs Streamlined
OVDP vs Streamlined: The OVDP vs Streamlined comparison is complex. Heading into 2020, and with rumblings of the International Revenue Service closing the Streamlined Filing Compliance Procedures (SFCP), now is an important time to consider your IRS offshore options, and whether OVDP 2019 is an option for consideration.
And, even if a person is non-willful, they may still benefit from traditional voluntary disclosure instead of the streamlined procedures.
*To avoid confusion, we will refer to the OVDP and updated voluntary disclosure as OVDP Voluntary Disclosure.
Let’s take a look and compare both programs:
Offshore & Domestic is Combined
Under either the OVDP Voluntary Disclosure or Streamlined procedure, a person (which includes more than just “individuals”) may submit domestic and foreign income in a single submission.
Important note: When it comes to the streamlined procedure, domestic vs. foreign refers to the residence of the applicant – not the specific locations of the accounts, assets, Investments or income.
A preclearance letter is used in OVDP Voluntary Disclosure – not streamlined. Testing the IRS waters by intentionally submitting a preclearance letter and then going streamlined is a highly flawed strategy.
While in previous years, the preclearance was “optional,” that is no longer the case. A preclearance letter is submitted on standardized Form 14457— the Form was updated in 3/2019.
Six (6) Years of Amended Tax Returns
Under the revised version of OVDP Voluntary Disclosure, the 8-years of tax return submission was reduced to 6-years. Under the streamlined procedures, the applicant is required to submit 3-years of amended or original returns (depending on if a filing was required in a particular year).
6-Year of FBARs
Under the revised version of OVDP Voluntary Disclosure, the 8-years of FBAR submission was reduced to 6-years. The Streamlined Procedure also requires 6-years, because the FBAR statute of limitations is 6-years.
International Information Return Penalty
Under the Streamlined Foreign Offshore Procedures, there is no penalty (full-penalty waiver). Under Streamlined Domestic Offshore Procedures, the penalty is limited to a single 5% penalty. Under OVDP Voluntary Disclosure, the IRS may determine that no penalty applies for international information returns. It all depends on the specific facts of the applicant (overall, this will be a good-thing for taxpayers).
FBAR & FATCA Penalties
Under the Streamlined Domestic, the FBAR penalties are combined with FATCA and other asset penalties, and limited to a single 5% penalty. Typically, the Form 3520 gift penalty is not included (but if the money is deposited into an unreported foreign account, the penalty on the unreported account(s) would apply).
The FBAR penalties under voluntary disclosure follow the IRM. The IRM is the Internal Revenue Manual. The FBAR penalty under the new OVDP Voluntary Disclosure is a baseline of 50% minimum value of $100,000 — whichever is greater.
*The penalty may be mitigated.
Penalties on Taxes Due
Under the streamlined procedure, there are no penalties on the taxes due. There is interest on the tax liability under either program, at the standard rate of interest. Under the prior OVDP, the penalty was 20% per year on taxes due. Under the revised version of OVDP Voluntary Disclosure, there is a single 75% penalty on the highest year taxes due, BUT, the taxpayer can seek to try to reduce the penalty.
No Formal Opt-Out
Under the Streamlined Procedure, there is no opt-out. If a person is submitting to the domestic version of the Streamlined, the 5% is not negotiable. Under the prior OVDP, the penalty was either 27.5% or 50% (if a bad bank was involved), but then the applicant could opt-out of the penalty (not the actual program) and seek to reduce the penalty. Under the new version of the program, the IRS may be able to audit the taxpayer, but there is no formal “opt-out.”
*These rules are subject to change,
Use a Board-Certified Tax Law Specialist
We have helped 1000s of clients nationwide and in over 75+ different countries. Our Offshore Specialist team is passionate about bringing clients into compliance. We want to help you understand the basics of these programs without being misled by inexperienced counsel, or being sold a false bill of goods from attorneys who are not dually-licensed in Law and Tax, and who intentionally misapply the principles of Kovel, and attorney-client confidentiality. Each case is led by a Board-Certified Tax law Specialist.
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:
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
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.