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Going by the US IRS tax code, everyone who is a citizen or resident of the United States needs to declare their global income and also pay the taxes on the income. The penalties for the ones who fail can be very severe.
Critical Points To Take Note Of About OVDP The Internal Revenue Service (IRS) has announced its Overseas Voluntary Disclosure Program (OVDP) in order to assist people from canceling their offshore accounts for getting current with taxes. The IRS reopened similar programs back in the year 2009 and 2011 and it generated more than $4.4 billion. However, OVDP 2012 enables those U.S citizens/residents who previously either unintentionally or intentionally failed to pay and report the taxes on their foreign income. The program has a less strict penalty for the ones who willingly admit their missing to report voluntary disclosures. Defining Overseas Voluntary Disclosure Program (OVDP) Going by the US IRS tax code, everyone who is a citizen or resident of the United States needs to declare their global income and also pay the taxes on the income. The penalties for the ones who fail can be very severe. The penalties are of three types, namely: ● Failure to file – Here the penalty is fixed at 5 percent of taxes by delaying each month of filing the income tax return, to a total higher penalty of 25 percent. ● Failure to pay – The penalty here is fixed at 0.5 percent of taxes for delaying every month from the initial payment deadline i.e. April 15th till the due balance is paid off. ● Interest – Interest is denoted by a specific percentage that is charged on the overall taxed amount owing to the time span the balance is not completely paid. The interest changes every few months. In order to avoid any kind of penalties it is advised that you partner with an expert tax planning agency in U.S that would provide predictive insights of the tax code that is applicable for the resident individuals in U.S consisting of the U.S citizens and the Green Card Holders. This apart, tax planning agencies also assist their end users in the following ways: ● Complete compliance that results in peace of mind ● Consultation and Impact Analysis ● Analysis and Planning to reduce FBAR Penalty ● AMT Strategies, Foreign Tax Credit ● Review of 2009, and 2010 OVDI cases ● Mutual Fund or PFIC computations ● Helps in preparing forms that are required to take part in the OVDP program ● Helps in preparing Tax Amendments and Delinquent FBAR ● IRS Representation by Enrolled Agents or Affiliated CPAs and Attorneys Additional Penalties For FBAR Failure There are few other additional penalties for failing to file FBAR. A failure that is intentional can be subjected to civil penalties that could range more than $100,000 or 50 percent of the account balance. There could also be a criminal penalty that may go up to $250,000 coupled with an imprisonment for 5 years. Read More About: Foreign Bank Account
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