Last year, the Internal Revenue Service ended its Offshore Voluntary Disclosure Program but there are still options via which taxpayers may be able to disclose foreign assets.

It is not uncommon for residents in Florida to invest their money in assets that reside in other countries. This can be a strategic and wise way to diversify a portfolio. However, it can expose some people to potential tax issues if any income related to these assets are not properly reported in the eyes of the Internal Revenue Service.

The Offshore Voluntary Disclosure Program

In 2009, the IRS instituted a program called the OffShore Voluntary Disclosure Program via which people could provide information about income from offshore assets that had not been previously included in a tax return filing. Participation in the program gave them a means by which they could become current on any past-due tax payments and avoid criminal prosecution for any failure to pay the taxes previously.

The program was updated in 2011, 2012 and 2014 but was discontinued in September of 2018. During the time the program was active, more than 56,000 taxpayers took advantage of it. In that same time, 671 people were indicted on criminal tax violations.

Disclosure still possible even without the OVDP

Without the OVDP, taxpayers can still choose to disclose offshore assets to the IRS but the process will be different in some key ways. According to CPA Journal, the OVDP, the penalty assessed was fixed but that is now removed, opening a level of uncertainty to taxpayers who may want to participate.

Additionally, the default penalty connects the disclosure to a willful versus a non-willful failure to disclose. The penalty for a willful nondisclosure is either half the value of an account or $100,000, whichever is larger. The penalty for a non-willful disclosure is capped at $10,000. Taxpayers may request the non-willful penalty.

Two other programs

The Streamlined Filing Compliance Procedures program may be used by taxpayers who are able to prove their prior nondisclosure was non-willful. They must file amended returns and may pay a 5% penalty if they live in the United States.

People may also use the Delinquent Report of Foreign Bank and Finance Accounts Submission Procedures to report offshore accounts. This, however, may only be used if they have not received any income from these reports.

Legal help is important

When it comes to dealing with the IRS and offshore assets, taxpayers in Florida should contact an attorney to fully understand their options and how to protect their rights and their assets.