This is the second article in a series regarding Frequently Asked Tax Questions relating to the Internal Revenue Service’s (IRS’s) Offshore Voluntary Disclosure Program (OVD Program). This series is intended to answer program participants’ most common questions. The first post in this series, offering a basic description of the OVD Program, can be found here.
Question: What are the requirements for taxpayers who want to participate in the IRS’s OVD Program?
Answer: The IRS’s OVD Program requires an eight year voluntary disclosure period. For the most recent eight year period, all applicants are required to provide the following documentation and information:
1. Copy of the previously filed original and, if applicable, previously filed amended, federal income tax returns for tax years covered by the voluntary disclosure.
2. Complete and accurate amended federal income tax returns for all the tax years covered by the voluntary disclosure, with applicable schedules detailing the amount and type of previously unreported income from the account or entity. For taxpayers who began filing timely, original, compliant returns that fully reported previously undisclosed offshore accounts or assets before making the voluntary disclosure for certain years of the offshore disclosure period, you should provide a copy of the previously filed returns for the corresponding years.
3. Copy of your completed and signed OVD letter and attachment explaining the relevant circumstances.
4. A check made payable to the United States Treasury. The check must include the amount of tax, interest, and accuracy-related penalty under IRC § 6662(a), and, if applicable, the failure to file and failure to pay penalties under IRC § 6651(a). If a taxpayer cannot pay the total amount detailed above, submit a proposed payment arrangement and a completed Form 433-A, Collection Information Statement for Wage Earners and Self-employed Individuals, or Form 433-B, Collection Information Statement for Businesses, as appropriate.
5. Completed Foreign Account or Asset Statement for each previously undisclosed foreign account or asset during the voluntary disclosure period if the information requested in that statement was not already provided in the initial OVD letter.
6. Completed penalty computation worksheet showing the calculation of the aggregate, highest account balance of the undisclosed offshore accounts, fair market value of foreign assets, and penalty computation, signed by the applicant and the applicant’s representative, if applicable.
7. Properly completed and signed agreements to extend the period of time to assess tax and FBAR penalties.