In another thread I mentioned the remarks of the new IRS Commissioner which indicate a potentially exciting improvement in the current OVDP program. For those who may have missed it, I'll mention the most important parts again:
"We are considering whether our voluntary programs have been too focused on those willfully evading their tax obligations and are not accommodating enough to others who don’t necessarily need protection from criminal prosecution because their compliance failures have been of the non-willful variety... We are also aware that there may be U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties... We are close to completing our deliberations on these respects and expect that we will soon put forward modifications to the programs currently in place. Our goal is to ensure we have struck the right balance between emphasis on aggressive enforcement and focus on the law-abiding instincts of most U.S. citizens who, given the proper chance, will voluntarily come into compliance and willingly remedy past mistakes."
Those who think that these changes might be very important to them may be wondering what form those changes might make. No one knows yet, but but there may be a hint from the changes suggested by the National Taxpayer Advocate not long ago wherein it purposed putting OVDP filers into 3 categories:
■» The first category, applicable to taxpayers whose underpayment of tax is below a reasonable threshold, would be permitted to come forward and pay their back tax, interest, and penalty without the imposition of any information-reporting related penalties, such as the FBAR penalty.
■» The second category would cover OVDP filers that cannot meet the threshold of category one, but can provide an explanation as to why their actions were non-willful. They would be required to pay back tax, interest, penalties, and Title 26 information reporting penalties (i.e. failure to file Form 5471 disclosing an interest in a foreign corporation) but not FBAR penalties.
■» The third category would cover all others, and they would be subjected to the currently applicable OVDP penalties (i.e. payment of back tax, penalties, interest, and a single 27.5 percent penalty).
If the actual improvements in the OVDP do include something like the first category (and I am particularly optimistic that it will), that would probably include a lot of people who got caught up in the whole RESP mess!
Impending OVDP Changes
Moderator: Mark T Serbinski CA CPA
Unfortunately, even if this comes to pass, I don't think it will tempt the majority of USC's in Canada into "coming into compliance". Most dual citizens in Canada are either "accidental Americans", or USC's who came to Canada long ago and stopped (or never started) filing US taxes because they knew they would never owe ANY tax to the US. Such Canadians feel they owe the US nothing, and will balk at paying thousands of dollars to an accountant or US tax preparer (if they can even find a competent one) to file many years of back tax forms, knowing that all this meaningless paperwork will not net the IRS one red cent.
As forecast, and much sooner than expected, major changes have been made regarding Offshore Accounts reporting and the OVDP.
One of the most important change for US residents is the extension of the 2012 Streamlined Program to now include US residents. The new program will require a miscellaneous offshore penalty of 5% of unreported assets (for US residents only). Additionally- and probably very important for many- will be the removal of the limit of $1500 of unpaid tax per year.
This will likely have a major impact for many non-willfull, non-compliant US residents: major reduction in potential penalities, avoidance of the OVDP and reduction in associated legal costs. Not to mention sleeping better. :)
One of the most important change for US residents is the extension of the 2012 Streamlined Program to now include US residents. The new program will require a miscellaneous offshore penalty of 5% of unreported assets (for US residents only). Additionally- and probably very important for many- will be the removal of the limit of $1500 of unpaid tax per year.
This will likely have a major impact for many non-willfull, non-compliant US residents: major reduction in potential penalities, avoidance of the OVDP and reduction in associated legal costs. Not to mention sleeping better. :)
As I understand it, those who were not only in pre-clearance, but fully in the OVDP when the 2012 Streamline Program was announced, were able to opt out of OVDP and go into the Streamline Program (if eligible). I believe also that at that time, any OVDP already-paid penalties were refunded.
I have no reason to believe that the same will not be true in the new program. These changes are not totally altruistic on the IRS' part. Those who are 'unnecessarily' in the OVDP are using limited IRS manpower that the IRS wants more directed towards the truly non-wilful, major offenders. So it's in the IRS' interest to let thoe eligible opt out of the OVDP.
I have no reason to believe that the same will not be true in the new program. These changes are not totally altruistic on the IRS' part. Those who are 'unnecessarily' in the OVDP are using limited IRS manpower that the IRS wants more directed towards the truly non-wilful, major offenders. So it's in the IRS' interest to let thoe eligible opt out of the OVDP.
Here is an IRS link to the new Streamlined Program as it applies to US Residents. The requirements seem pretty benigh compared to the OVDP. There are even statements that non-willful accuracy mistakes will not result in the previous onerous penalties even if they are picked up in a later audit.
http://www.irs.gov/Individuals/Internat ... ted-States
fwiw: there is a statement in there to the effect that no prior penalties already paid will not be refunded.
http://www.irs.gov/Individuals/Internat ... ted-States
fwiw: there is a statement in there to the effect that no prior penalties already paid will not be refunded.
Ottawa123: 'Sorry what does it mean if one is in pre clearance?
Hiw does one transfer to streamline'
This is where it's best to have your lawyer guide you. My understanding is that, if your lawyer agrees that you are both eligible for the Streamlined Program and also it would benefit you over the OVDP, then you can ask to opt out of the OVDP to enter the SP.
Hiw does one transfer to streamline'
This is where it's best to have your lawyer guide you. My understanding is that, if your lawyer agrees that you are both eligible for the Streamlined Program and also it would benefit you over the OVDP, then you can ask to opt out of the OVDP to enter the SP.