There are many considerations before a taxpayer should determine whether to participate in the 2011 OVDI. Is the taxpayer a realistic candidate for a criminal prosecution referral by the IRS or prosecution by the Department of Justice? (If so, the determination to participate should be simple and quick). Can that prospect somehow be reduced or eliminated by filing amended or delinquent returns and FBARs in lieu of a direct participation in the OVDI? (and what would be the potentially applicable penalties upon a examination of such returns and FBARs?). Could the government carry the burden of demonstrating that the taxpayer “willfully” violated the FBAR filing requirements? Since the OVDI asserts an offshore penalty based on foreign financial accounts and asset valuations, would the actual offshore penalty determination somehow be less outside the OVDI if limited to financial accounts? Will the government pursue noncompliant taxpayers through the required judicial process following assessment of an FBAR penalty? n9 Might the FBAR related mitigation guidelines set forth in the Internal Revenue Manual (IRM) somehow benefit the taxpayer outside the framework of the 2011 OVDI? Do these mitigation guidelines have any continued viability? How will various of the FAQs under the 2011 OVDI be interpreted in specific taxpayer situations?I know that some of the considerations have been addressed in the threads on other blogs, but this might be a good opportunity to collect them in the comments for benefit of future readers.
Many taxpayers will decide to participate in the OVDI based on a personal desire to come into compliance now that they are aware of the FBAR and other foreign account reporting requirements. Others recognize an opportunity to repatriate stagnant foreign funds into a domestic recessionary economy or may simply want to move on with their lives. The ability to properly advise a client regarding participation in the 2011 OVDI requires at least a general understanding of the potentially applicable foreign-related penalties for nonparticipants, the historic IRS and Department of Justice voluntary disclosure practice and policies and a healthy respect for the ongoing governmental international tax enforcement efforts within a shrinking global community. Also, the representative must be aware that relevant processes and procedures seem to change frequently.
This question is perhaps related to the question of whether a taxpayer in one of the OVDI programs should opt out and take the risk and consequences of an audit. I will solicit thoughts on that question in a later blog, So, I urge readers to focus here on the decision whether to join the OVDI initiative ab initio.
Thanks in advance.
I want to sound one cautionary note to any taxpayers who are not counseled by an experienced attorney in undergoing this analysis. Do not do it without the knowledge and experience of an experience attorney. This blog is not intended as a self help, do it your self guide in an area that is fraught with the opportunity for foot faults that have major consequences.