On January 9, 2012 the IRS reopened “OVDI” (Offshore Voluntary Disclosure Program). Some people with past compliance problems will surely consider (with the encouragement of the “cross border professionals”) whether to enter OVDI. The Isaac Brock Society issued a press release warning people to not enter OVDI without carefully considering the merits. Obviously nobody should enter OVDI without a careful consideration of the penalties. At the risk of oversimplification (and this post is not legal advice or any other kind of advice):
1. If you enter OVDI, in addition to paying any taxes owing, you are agreeing to pay penalties of a percentage of your net worth (a range from 5% to 27.5%).
2. If you do not enter OVDI and information return penalties become an issue (outside the context of voluntary disclosures), they will not be automatically presumed (but again this is heavily dependent on the circumstances and you should absolutely get legal advice).
The following comments are part of a thread. I thought they were worth a separate post. They are a conversation between a former IRS attorney and a famous “minnow”. They are relevant to the issue of penalties for failing to have filed information returns.
Interpret this as you will. It is not offered as legal advice. But, it does raise issues that might we worth discussing with your lawyer. Thanks to Mr. Mopsick. It is a rare lawyer indeed, who is willing to talk about anything but OVDI! You may want to read the complete post before reading these comments. (I have made no effort to fix the typos in these comments.) Continue reading