IRS Amnesty OVDP 2012 - Civil Penalties and Criminal Charges

This is a two-part article that looks at the civil penalties and criminal charges that would be applied if the tax evaders fail to participate in the IRS Amnesty OVDP 2012.

With the IRS Amnesty reopens the Overseas Voluntary Disclosure Program (OVDP), taxpayers must come forward and make a voluntary disclosure of the undisclosed foreign accounts or entities. Such a move would enable them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. As per this program, taxpayers must make a voluntary disclosure of undisclosed foreign accounts or entities of the past eight tax years for which the due date has already passed. And if the tax evaders fail to make use of this opportunity and risk detection by the IRS, they would be subjected to civil penalties and criminal prosecution. Here is a look at the penalty framework and the criminal charges that would be applied.

Civil Penalties

The civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. While the non-willful violations are subject to a $10,000 penalty per violation.

The penalty for failing to report the taxpayers interest in certain foreign financial assets, including financial accounts, certain foreign securities and interests in foreign entities is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

The penalty for failing to file the Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

 The penalty for failing to file the Information Return of Foreign Trust with a U.S. Owner is the greater of $10,000 or 5 percent of the gross value of the trust assets determined to be owned by the United States person.

The penalty for failing to file the Information Return of U.S. Persons with Respect to Certain Foreign Corporations is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

In the second and concluding part of this article, we will look at the rest of the penalties and charges and the solution for avoiding it.

Read More About: Foreign Bank Account