3 Our Clients Have Asked Us, to Warn You!
5.1 What is an IRS Enrolled Agent (EA)?
5.2 Why Use an Attorney with an EA and LL.M. (Masters in Tax)?
12 Are They Selling You on Streamlined, When You Were Willful?
20 How Does an OVDP Case Work?
22.12 We Can Help You.
You will want to make sure you use an OVDP Attorney who has extensive Litigation Experience, IRS Audit Experience, Trial Experience, advances Tax Degrees such as a Master's of Tax Law Degree (LL.M.); and either a CPA or Enrolled Agent (EA) license.
IRS Offshore Voluntary Disclosure is ALL we do. While our lead partner, Mr. Golding has been practicing for more than 18 years as an attorney, and has extensive experience in complex, high-stakes Eggshell Audits, Reverse Eggshell Audits, Criminal and Civil Litigation, we limit our practice exclusively to IRS Offshore Voluntary Disclosure.
We have successfully handled several hundred OVDP and Streamlined Disclosure cases.
Our Clients Have Asked Us, to Warn You!
About 15% of our clients come to us after first having went to a less qualified OVDP lawyer first, that baited them in with artificially low fees.
Our clients have told us over and over again, that they wish they had known these issues prior to retaining their initial attorney.
Spend lots of time reading quality articles (if you have the time) from our firm and other firms that specialize in OVDP. Avoid fear-mongering sites and general tax practitioners. We have several free resources available on our site, which you can find on our FAQ page.
You should read as many of these articles as you can, so you can get a solid understanding of the OVDP 'program' and the submission process.
International tax law, and especially offshore voluntary disclosure is very complex. There are many components to an offshore disclosure, including the tax aspect, the accounting aspect, the legal aspect, and the potential audit or litigation aspect.
Nearly all the top attorneys in this field who focus exclusively on International Tax, and who handle OVDP regularly, have an advanced Tax Law Degree (LL.M.) and hold either a CPA or EA designation.
If an attorney is an experienced attorney practicing in this field, it is almost a prerequisite to have both an advanced degree such as an LL.M (which is a Master's of Tax Law) and either a CPA designation or Enrolled Agent ("EA") designation (an EA is the Highest Credential awarded by the IRS).
What is an IRS Enrolled Agent (EA)?
An Enrolled Agent (EA) is the highest tax credential awarded by the IRS.
*The EA exam is very difficult, which is why the credential is not well-known. It requires a person to pass three (3) different exams (Individual Tax, Business Tax, and Ethics) during three different sessions on three different days, as well as take more than 72 hours of Continuing Education over 3-years.
Many Attorneys have tried taking the EA exam, but failed the exam due to the fact that they just do not have the tax knowledge necessary to pass all three (3) portions.
Why Use an Attorney with an EA and LL.M. (Masters in Tax)?
It takes this type of Legal and Tax background to be able to properly vet out your case. If your attorney does not have this experience, then who is properly evaluating your case? Sure, they may tell you your case seems easy — but that is because they do not know any better. It's just not worth the risk.
Click here for a case study example of what happens when you retain inexperienced counsel in OVDP.
This is not the time to be bashful.
Multiple examples of penalty reductions, PFIC Elections, and other penalty reduction strategies they have used in the past.
Ask them the hard questions during the interview, and if they stumble or falter during their explanations, move onto the next Attorney.
Usually, you do not know if you are going to opt-out until the end of the OVDP process — which is not the time to learn your Attorney has about as much experience with OVDP that you do.
We are one of the only firms that has successfully represented clients in OVDP Opt-outs, and at times have reduced the OVDP penalty to below what the Streamlined Penalty would have been.
Click Here for a recent OVDP Opt-Out, in which we were substituted into the case as counsel after one of these unqualified firms baited the clients with artificially low fees and put the clients into serious financial jeopardy. We successfully reduced an OVDP penalty by 85% and achieved a lower penalty than the client would have received under the Streamlined Program.
In order to properly complete an OVDP or Streamlined Application, it takes time. And time, cost money. Yes, you can go to a junior attorney and pay a significantly reduced fee, or a very senior attorney with no real interest in your case — but you typically get what you pay for.
The Attorney has "no idea" about how the tax returns were prepared.
This is another one of those sales pitches to be cautious of.
Working in the Offshore Disclosure Department of the IRS as a Senior Attorney or as an IRS Trial Attorney may be valuable experience. Anything less is just smoke and mirrors being used to divert you from the fact that the Attorney lacks OVDP Attorney experience.
The OVDP department of the IRS has its own set of rules, policies and procedures – it operates much differently than the rest of the IRS.
You need an Attorney experienced in OVDP.
While we are not fans of litigating unless necessary, our Attorneys have litigated highly complex cases. Mr. Golding has represented thousands of clients in many complex cases throughout his nearly 20-year law career. He has successfully avoided criminal prosecution for clients in Tax, Business and Corporate matters.
Mr. Golding has represented clients facing prosecution, and on many occasions facilitated all charges being dropped. We have also handled many complex Audits, including Eggshell audits and Reverse Eggshell Audits, without a single client being referred to prosecution.
This experience helps up to best represent our clients. Without experience litigating on behalf of their own clients in court, many newer attorneys or attorneys without any litigation experience are lost (along with you) when the IRS decides to push back.
Are They Selling You on Streamlined, When You Were Willful?
The IRS is clear: If you were willful at all, then you cannot qualify for the IRS Streamlined Program. There are no exceptions for people who were only willful for a year or two, and no exceptions for people who only failed to report "small" amounts of income. We find it reprehensible that there are other attorneys intentionally putting potential clients in serious financial risk, as well as harm's way for a potential IRS Criminal Investigation, by pushing them into Streamlined when they know the client was willful.
Once you submit to the Streamlined Program, you can not thereafter submit to OVDP.
If a person is willful, they do not qualify for Streamlined or Reasonable Cause. It doesn't matter whether it was 1-year, 5-years or 10-years worth of non-compliance.
**While the extent of the willfulness penalties might be mitigated through an OVDP Opt-Out, you should never submit a reasonable cause letter or streamlined submission if you were willful. This is especially true, since the IRS has begun auditing Streamlined Submissions.
There are many aspects that go into any particular tax calculation, including the legal status, marital status, business status and residence status of the taxpayer.
OVDP is an acronym for Offshore Voluntary Disclosure Program. It is the traditional Internal Revenue Service program designed to bring individuals, estates, and businesses into Offshore and Foreign Compliance.
In this summary, we will breakdown each element for you, to provide you a basic understanding of how the program works.
Therefore, in order to qualify for OVDP you must have unreported assets, income or investments abroad. If you do have offshore assets, income or investments, then you can report them with OVDP — and you can include domestic undisclosed money as well.
But, it is important to keep in mind that you do not get the same protection for your domestic undisclosed money that you receive for your offshore undisclosed money. Moreover, if you do not have any undisclosed offshore money, and all of your unreported money is domestic (located in the United States), you can submit to the IRS Domestic Voluntary Disclosure Program, but not OVDP.
Unfortunately, the IRS Domestic Voluntary Disclosure Program does not provide the same protections and reduced penalty structure as the Offshore Voluntary Disclosure Program.
Voluntary means you are entering the program on your own volition.
Usually, it means that you are not under audit or under examination with the IRS. That is because if you are already under IRS audit or examination and then submit to the program, you are not technically doing so voluntarily. Rather, you are entering the program in response to being audited or examined.
The reason the IRS does not allow you to enter OVDP once you are under audit is because you have a proactive responsibility during an audit or examination to bring these issues to the forefront and explain them to the auditor — even if the auditor did not ask about offshore accounts specifically – but assuming he or she asks about additional income, assets, etc.
With that said, it is important to keep in mind that you have the right to not self-incriminate yourself.
When you are under audit or examination you can be subject to excessively high fines and penalties which are mitigated through traditional OVDP. The IRS will not let you out of those penalties (if you are audited) by submitting to OVDP at that time.
By disclosure, the IRS is referring to full disclosure. If you want to voluntarily disclose offshore money, then you have to do a full disclosure and report all of the information you have regarding all of your offshore money abroad.
It does not matter if the money was held in an account within a branch or institution that went out of business. It also does not matter that your money is being held in an anonymous account that you firmly and wholeheartedly believe can never be discovered.
Rather, from the IRS' perspective, when it is time to disclose – you must perform a full disclosure and report all of the information — no matter how low the chances that the IRS could ever discover the information, account information, investments or income otherwise.
OVDP is an approved IRS program. There are specific time requirements and reporting disclosures that must be done according to OVDP milestones. If you fail to meet these milestones timely, the IRS can remove you from the program, which now means the IRS has at least some specific information regarding your offshore finances, and can now enforce incredibly high fines and penalties against you.
Worse yet, you no longer have the protection of OVDP.
How Does an OVDP Case Work?
The person submits a preclearance letter. It typically takes the IRS 30 to 45 days to respond to the letter. After around 45 day you will learn whether you have been accepted or rejected into OVDP. Despite what some inexperienced attorneys will tell you online, not everyone gets accepted. And if an attorney has told you that everyone always gets accepted, than they have not been practicing in this area of law long enough – especially with the introduction of FATCA.
The applicant has 45 days to submit the initial disclosure to the IRS. It is a relatively detailed breakdown of the different accounts, transfers, opening and closing of the accounts, and related information. It is not as detailed as preparing and submitting IRS forms and schedules such as general FATCA Reporting, FBAR, 3520, 5471, 8621, 8865, 8938 — but it is still relatively comprehensive, and more detailed than it had been in years past, especially pre-FATCA.
Presuming that the applicant is accepted, the applicant then has 90 days to submit the full disclosure, including all necessary FBARs, schedules, penalty competitions, legal arguments for mitigation of penalties, etc. Depending on the specific facts and circumstances of your case (numerous PFICs, Foreign Mutual Funds, ETFs, etc.), it may take longer for you to compile the information or prepare the necessary documents. The IRS routinely grants extensions to file.
We know…it seems nuts to acquiesce to the IRS before they have even found you, audited you, or examined you — and allow the IRS to issue penalties against. You may instead also consider submitting an IRS Quiet Disclosure in hopes that you can fly below the radar without getting caught.
First, a quiet disclosure may lead you to jail or prison. For a comprehensive case study on how IRS required disclosure of offshore money can go wrong, please refer to our prior blog page on Quiet Disclosure, Criminal Investigations & Prison.
When it comes to penalties, the IRS has extreme leeway. On the one hand, if a person can show reasonable cause, then often times penalties will be waived. On the other hand, the IRS has the right to issue penalties which can reach 100% value of the foreign account in a multi-year audit scenario (noting, that up until recently the IRS issued 300% penalties for unreported FBARs, when a person was found to be willful and penalized at 50% within the 6-year SOL).