On behalf of Silver Tax Group posted in Offshore Accounts on Thursday, March 30, 2017.
The Internal Revenue Service will likely continue to crackdown on alleged failures to report offshore income and foreign assets. Any taxpayer with over $10,000 invested in foreign bank accounts could be a target for the IRS. Tax penalties for noncompliance are significant. Not only can the IRS take 50 percent of any value of the account, the agency may also assess fines, penalties and possible criminal charges.
IRS provides OVDP
The IRS offers various programs allowing taxpayers to come into compliance with IRS regulations including the Offshore Voluntary Disclosure Program (OVDP). Many join such a program in order to avoid government prosecution. There may also be the advantage of capping penalties by enrolling in the OVDP. However, the penalties one faces while a part of the OVDP (which can also prove to be stiff) have made many individuals at some point decide to opt out of the program.
Unfortunately, there are no simple decisions when it comes to dealing with tax allegations. Opting out of the OVDP can come with its own price tag. For one, the election to opt out is irrevocable. Also, a taxpayer could end up facing many of the same penalties that drove them to join the OVDP to begin with. And besides facing possible criminal penalties, the IRS may request an interview with this particular taxpayer.
A huge question concerning opting out is whether the savings in taking such an action is actually worth the trouble. Many taxpayers may only decide to opt out if a large amount of dollars is at stake.
Facing the dilemma
Michigan taxpayers facing the dilemma of owing taxes due to offshore income need to consider all of their options regarding whether to join the OVDP or whether to opt out from the program at some point. Such decisions should be made on a case-by-case basis, and may require the advice of legal counsel before taking action.