Answers to the Most Frequently Asked Questions Regarding OVDP
As a tax attorney specializing in the Offshore Voluntary Disclosure Program (OVDP), nary a day goes by that I don’t get a call from a person inquiring about the OVDP. The questions asked are relatively the same. After a while, I began to make a list of the most frequently asked questions. Below are my answers to them: (continued)
V. What years are included in the OVDP disclosure period?
(1) For calendar-year taxpayers:
The voluntary disclosure period is the most recent eight tax years for which the due date has already passed.
Example: Assume that Kate submits a voluntary disclosure after April 15, 2014 but before April 15, 2015 (or other 2014 due date under extension). The disclosure period includes each of the years 2006 through 2013 in which she had undisclosed foreign accounts and/or undisclosed foreign assets.
(2) Fiscal year taxpayers:
Fiscal year taxpayers must include fiscal years ending in calendar years 2003 through 2010. For taxpayers who disclose after the due date (or extended due date) for 2011, the disclosure must include 2004 through 2011.
(3) What about taxpayers who establish that they began filing timely, original, compliant returns that fully reported previously undisclosed offshore accounts (or assets) before making a voluntary disclosure?
The voluntary disclosure period will begin with the eighth year preceding the most recent year for which the return filing date has not yet passed. However, the compliant years will not be included.
Example: Willie Wonker has filed income tax returns omitting income from a securities account in Switzerland. He began reporting that income on his information reporting returns for 2009 and 2010 without making a voluntary disclosure. Willie subsequently filed a voluntary disclosure in January 2012.
Because January 2012 came after April 15, 2011 but before April 15, 2012, the most recent tax return that Willie had filed when he made his voluntary disclosure was 2010. Indeed, Willie’s 2010 tax return was due on or before April 15, 2011. His 2011 tax return was not due for another four and-a-half months. Therefore, 2011 is the most recent year for which the return filing date has not yet passed. And because 2010 is the year preceding 2011, 2010 is the year that is used to extrapolate the eight-year look back period. Because 2003 is the eighth year prior to 2010, the voluntary disclosure period began in 2003.
However, because Willie came into compliance beginning in tax year 2009, neither tax year 2009 nor 2010 would be included. Therefore, the voluntary disclosure period will only be from 2003 until 2008.
Next: VI. How is the offshore penalty calculated?
In accordance with Circular 230 Disclosure
As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.
Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.
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