The OVDI ‘opt-out’ is a confused process without having specific policies and also its procedure seems to be very subjective. So we came up here with expert answers to many of the common questions related to the OVDP opt out process.
1. Will I be Criminally Charged by the Internal Revenue Service If I Opt-out of the OVDI?
No. This confusion is there is because when you go for opt -out option, you are not really opting out of the OVDI. Yes !, read that again.
The Truth Is, you will opt -out only from the OVDP standard penalty cap. In the standard OVDP penalty fee cap, you pay one penalty either (a) 12.5% of account worth, Offshore “FBAR equivalent” penalty for accounts below $75,000, or (b ) and 27.5% for balances above $75,000. So you opt -out just the standard 12.5% or 27.5% penalty cap. You are not opting out of the entire program in anyway. So there will not be felony charge against you should you opt- out from the OVDP.
2. Will the IRS impose me greater than the standard 12.5% or 27.5% offshore penalty fee when I opt-out?
Although it's possible, we haven't found such case so far. The IRS has no intention of punishing any person who utilizes the OVDI. The truth is, according to the IRS, they are doing the right thing. We may see the IRS charging an individual more, however this could only occur when they give the OVDP unit a difficult time.
3. Just how many successful OVDPs opt-out have been done?
The opt-out program is pretty new, at least in IRS years. For the opt -outs which was submitted in 2012, only a very small number of successful cases has taken place thus far. The IRS is trying to centralize all opt-out decisions for uniformity, so there will be a queue that many of our cases are in for approval of the5% penalty.
One more reason for the delay is due to the misjudgment by the IRS over who will majorly utilize the opt-out program. They believed that the deliberate tax evaders would largely use this program however the the fact is, the innocent filers (especially dual citizens, ex-pats and Visa holders) ended up being the main users of the OVDI.
4. My appeal legal rights
You can not appeal inside the OVDI program but an opt-out gives multiple appeal rights for you. Also outside the program, the IRS may charge several 50% penalties which can eliminate your whole assets within seconds. This has previously happened and the IRS will do this again at anytime.
5. Why I need to use OVDI when I can just come up with a ‘soft’ disclosure?
The final decision to enter into the program is completely yours. However keep in mind that there's a likely risk of FBAR review when you don't wish to get involved with the program. There could not be criminal charges (even though it is possible), however if caught in a FBAR review, the results could possibly be catastrophic.
These people prefer to submit a 'soft' disclosure. These people consider that this option can protect them from legal prosecution for tax fraud, but the IRS claims it is hunting for those individuals who have used soft disclosures. They already identified about 10,000 persons and they also can be threatened with prosecution. When you didn’t disclose the foreign accounts on the tax returns and also didn’t file FBARs, the choices will become tougher for you.
6. If I made a soft disclosure can I still use the OVDI?
Definitely. And you have to. Like said previously before, the IRS has discovered 10,000 individuals who has utilized soft disclosure. And these are only the accounts above $1,000,000. The number will be much higher for accounts below $1,000,000
7. Exactly how much is this going to require me to pay?
In order that you to make the best possible decision, we think you need to know exactly what the complete cost of going through the OVDI is going to be. It primarily include the attorney as well as accounting fees. And that’s why, we quote a flat-fee guarantee for all of our range of work. While we can guarantee our fee, we can’t command the IRS. All we will actually do is directing you to take right steps at the right time. When you have reasonable cause, the likelihood of getting positive end result is much higher.