You face a challenging financial situation. You want a reprieve—a clean slate. Both streamlined programs and the Offshore Voluntary Disclosure Program (OVDP) may be able to help. What are these options? How do they compare to one another? Which should you choose?
The Pros and Cons of OVDP
Are you worried about criminal prosecution because you failed to comply with U.S. tax obligations? The OVDP can reduce the chance of prosecution—as long as you comprehensively disclose all your foreign records and assets.
The OVDP has drawbacks, though. It drags you through a long compliance process with multiple stages. Prepare for an avalanche of paperwork. The process can take up to two years to complete. In addition, the OVDP applies a miscellaneous offshore penalty of 27.5% of your highest foreign account balance. That’s not cheap.
The Pros and Cons of Streamlined Programs
Streamlined programs tend to be faster, and you face fewer penalties. Instead of eight years of amended earnings—what the OVDP demands—you only have to submit three years of amended earnings. In addition, you only need to submit of six years of missing FBARS, instead of eight years, as the OVDP requires.
Depending on the situation, you may apply for either of these programs:
- Streamlined Foreign Offshore Procedures: Obliges you to pay your taxes and administers a 0% offshore fee.
- Streamlined Domestic Offshore Procedures: Obliges you to pay a 5% fee on your largest balance for the agreement duration.
Unlike the OVDP, the streamlined programs do not offer a pathway to prevent the risk of criminal prosecution. Depending on the situation, this may be a deal breaker. In other words, the IRS can still pursue a criminal investigation even if you’re enrolled in the programs.
How should you handle your FBAR related crisis? Should you choose the OVDP to avoid going to jail… or one of the streamlined programs to minimize hassle and penalties? We can give you insight. Contact the Highland Tax Group at 720-398-6088 to discuss your situation.