Resolve Tax Issues with Overseas Voluntary Disclosure Programs
Tax relief programs are meant to help the public servant, business enterprises and every working individual pay their taxes to the government without fail. Taxpayers irrespective of them being an individual or a business enterprise, in their busy schedule fail to follow according to the norms of filing their tax returns. The income tax departments have designed and developed various amnesty and voluntary disclosure programs allow these tax defaulters to come forward to pay their taxes in full.
Effective tax planning on the part of the of the taxpayer will help them avoid the penalties that come with delayed filing of taxes . Today's globalized work environment has led to a large number of distantly distributed and offshore teams. With such a mobile workspace, it becomes quite easy for individuals to avoid tax payments. However, Internal Revenue Service and U.S. Government organizations have engaged themselves through various practices to bring the taxpayer with undisclosed foreign bank accounts meet the tax regulations in compliance with the U.S requirements. This is so because under the U.S. Department of Treasury and FBARpolicies, any citizen of the United States needs to file an annual FBAR if he has any financial account that is situated outside U.S or the value of the account surpasses $10,000 during the financial year.
The Overseas Voluntary Disclosure Program developed by the IRS is meant to assist people who have unintentionally or intentionally failed to pay and report the taxes on their foreign income and instead tend to cancel their offshore accounts. With less penalty added, this program aims to help those individuals or business enterprises to willingly admit their missing tax dues and report voluntary disclosures. Similar IRS amnestyprograms implemented earlier helped the government generate more than $4.4 billion.
In the era of globalization, the US IRS tax code requires every US citizen irrespective of presently residing or being a non-resident to declare their global income, failure of which may lead to penalties. The penalties however depend on the tax evasion activities. However, the OVDP penalty framework for the present year requires defaulters too
- Pay a penalty up to the maximum of 27.5% of the highest aggregate balance in any undisclosed foreign accounts for eight full tax years prior to the disclosure
- File all tax returns including payment of back-taxes and interest for up to eight years, as well as any penalties incurred.
Though effective tax planning by efficient service providers and tax professionals will help the tax payers, the defaulters who file their tax returns under the Overseas voluntary disclosure Program are also benefited. The voluntary disclosure provides them total compliance with US tax laws, analysis and planning to reduce FBAR penalty, AMT strategies and foreign tax credit besides other benefits.