The following are the seven steps of the new updated IRS voluntary disclosure process: A…
IRS Updated Voluntary Disclosure Practice is a Game-Changer
Last week the IRS released a memorandum with new procedures for an “Updated Voluntary Disclosure Practice” impacting all voluntary disclosures. The new updated voluntary disclosure practice (VDP) is a game-changer for offshore voluntary disclosures for US persons with unreported foreign assets.
The Updated VDP Procedures
The new procedures continue to provide taxpayers an ability to come into tax compliance and eliminate the risk of criminal prosecution, but with many changes. Some of the changes are procedural changes, such as no longer requiring the filing of required tax returns and additional documents until an IRS agent is assigned to the case. Other changes are more substantive, including changes to the disclosure period and penalties. The new Updated VDP Procedures DO NOT change other IRS programs, such as the IRS Streamlined Compliance Procedures (for non-willful US persons) including the popular Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
The Updated VDP Disclosure Period
In general, the disclosure period has been reduced to six years.
Penalties
Under the new procedures, the penalty for underpayment of tax has increased to 75%. The IRS will assess a civil-fraud penalty to the tax year during the disclosure period with the highest tax liability. In exceptional cases, taxpayers can request the imposition of the lower 20% accuracy-related penalty.
The FBAR penalty has also been changed under the new procedures whereby the IRS will assert willful FBAR penalties. In most cases a penalty for a willful FBAR violation will likely be 50% of the highest aggregate balance of all unreported foreign financial accounts during the disclosure period. In exceptional cases, taxpayers again can request the imposition of the lower non-willful FBAR penalty.
Right to IRS Appeals
An additional procedural change is that taxpayers who cannot reach an agreement with the IRS will retain the right to go to IRS Appeals.
Conclusion
Noncompliant U.S. persons should consult with experienced legal counsel to analyze their legal options and determine whether filing a voluntary disclosure under the new rules is appropriate.
Patel Law Offices offers a strategy session to discuss how to resolve your legal problem. Conveniently schedule online today with our online scheduler and questionnaire.
Related Posts
- New IRS Voluntary Disclosure in 7 Steps
- IRS Announces “Good Faith” 90 Day Extension of Voluntary Disclosure Deadline
The IRS said last week that it is making available to taxpayers a 90-day deadline…
- New Post-OVDP IRS Voluntary Disclosure Procedures Announced
The Internal Revenue Service released new updated procedures for voluntary disclosures since the old Offshore Voluntary…
Search
Recent Posts
- New Offshore Tax Evasion Investigation: Trident Trust January 31, 2025
- Parag Patel Esq. speaker at the National Association of Enrolled Agents (NAEA) Seminar “Criminal Tax: What Tax Professionals Need to Know to Help Clients and Themselves” January 23, 2025
- New Seminar “Federal Tax Update: What to Expect for the Unexpecting: What Tax Professionals Need to Know to Help Clients & Themselves” January 17, 2025
- John Doe Summons: A potent investigative tool used by the IRS January 14, 2025
- Improving Voluntary Compliance: Reform the IRS Criminal Voluntary Disclosure Practice January 13, 2025
- NJCPA Seminar: “A New Foreign Frontier: Foreign Income & Asset Reporting Update ” December 15, 2024
- Live Webinar on U.S.-India Tax Planning: Key Issues, Tax Treaties: Limited Free Registrations Available December 9, 2024
- New IRS Form Simplifies Section 83(b) Election for Restricted Stock December 7, 2024
- Taxpayer Wins Form 5471 Penalty Case December 3, 2024
- NJCPA Seminar “Federal Tax Enforcement Update on What to Expect for the Unexpecting: What Tax Professionals Need to Know to Help Clients & Themselves” December 1, 2024
- Analysis of the Revised Form 14457: Key Changes to the IRS Voluntary Disclosure Practice November 30, 2024
- IRS Changes Rules (Again) for Forms 1099-K Issuance from Venmo, Paypal, etc. November 27, 2024