VOLUNTARY DISCLOSURE PRACTICES (VDP)
Get compliant with your tax obligations if you own foreign accounts, assets, investments, and income.
Have you failed to report or pay tax on income from foreign financial assets?
Are you unable or unwilling to certify non-willful conduct?
If you’ve willfully failed to comply with your tax obligations, Voluntary Disclosure Practices are a way to resolve your non-compliance and avoid criminal prosecution.
To learn more, schedule a FREE consult with us today.
IF YOU OWN FOREIGN FINANCIAL ASSETS, YOU’RE REQUIRED TO:
- Report them on your tax returns
- Pay tax on foreign income, and
- File tax returns on time
The IRS Voluntary Disclosure Practices (VDP) were designed to bring you back into tax and reporting compliance if you own offshore accounts, assets, investments, and income.
WHAT TO CONSIDER BEFORE USING VOLUNTARY DISCLOSURE PRACTICES
Before using VDP, it’s important to assess if you’re eligible for a less severe tax amnesty program. For example, if there’s a case for non-wilful conduct, there are alternate amnesty programs with lower penalties to get you back into tax compliance.
Schedule a confidential consultation with our tax experts today to review your case.
VOLUNTARY DISCLOSURE PRACTICES HELP YOU:
- Report previously undisclosed tax-related documents and information, including details of foreign financial assets,
- Pay taxes and interest owing,
- Avoid criminal prosecution in exchange for paying a higher penalty.
VOLUNTARY DISCLOSURE PRACTICE PENALTIES
By using VDP to get back into tax and reporting compliance, you get the benefit of:
- Avoiding criminal prosecution in exchange for paying a higher penalty,
- Avoiding further auditing or investigation under the terms of the Closing Agreement issued upon completion of the program.
The penalties for using Voluntary Disclosure Practices aren’t fixed. They vary and are determined by several factors, including:
- The taxpayer’s compliance and cooperation with the program,
- The IRS findings of the case.
If the taxpayer fails to cooperate, the maximum penalties allowed by law can be imposed.
ARE YOU ELIGIBLE FOR IRS VOLUNTARY DISCLOSURE PRACTICES?
Eligible for VOLUNTARY DISCLOSURE PRACTICES
- Your failure to report and/or pay tax on foreign financial assets is due to willful conduct
Not Eligible for VOLUNTARY DISCLOSURE PRACTICES
- You’re under audit or criminal investigation
- The source of your income is illegal
Non-willful Conduct
Non-willful conduct is conduct resulting from:
- Negligence,
- Inadvertence,
- A mistake, or
- A good faith misunderstanding of the requirements of the law.
If you can certify non-willful conduct:
- You may be eligible for an alternate, simpler tax amnesty program to get back into tax compliance.
Otherwise, if you’ve committed tax-related crimes and have criminal exposure due to willful violation of the law:
- Voluntary Disclosure Practices are an option.
Foreign Financial Assets
Foreign financial assets refer to assets held outside the US, including:
- Bank and investment accounts maintained by a foreign financial institution,
- Stocks and securities issued outside the US,
- An interest in a foreign retirement/pension or deferred compensation plan.
Certain assets are not considered foreign financial assets by the IRS, including:
- Real estate outside the US.
OVERVIEW OF IRS VOLUNTARY DISCLOSURE PRACTICES
If you decide to use VDP to make a disclosure, you must first request participation in the program by:
- Completing Part I of Form 14457 and submitting it to the IRS to request preclearance,
- After receiving preclearance confirmation, submitting Part II of the Voluntary Disclosure Application within 45 days.
If you’re approved to participate in VDP:
- You’ll receive a Preliminary Acceptance Letter,
- Your case will be assigned to an IRS CI (Criminal Investigation) examiner,
- You’re expected to cooperate with the examiner to determine your correct tax liability, including providing documents and information.
After completing Voluntary Disclosure Practices, you’re expected to:
- Pay in full all tax, interest, and penalties owing,
- Comply with the law for all future years and file returns according to regular US tax filing procedures and pay all taxes owing.
Do You Know Your Us Taxpayer Obligations?
Taxpayer Obligations for US Citizens
As a US citizen, you’re required to:
- Report all worldwide income,
- File tax returns on time, including international information returns such as FBARS,
- Pay taxes owing on your worldwide income.
All US citizens must file US tax returns, even if you’re living or working outside the US.
Taxpayer Obligations for Foreign Expats in the US
As a foreign expat and US resident for tax purposes, your tax obligations are the same as for US citizens. So you’re required to:
- Report all worldwide income,
- File tax returns on time, including international information returns such as FBARS,
- Pay taxes owing on your worldwide income.
Even if you’re not a resident for tax purposes, you’re still required to file US tax returns and pay US taxes. But you don’t need to report your offshore income and assets, and you’re not eligible for VDP.
Resident vs Non-Resident Tax Status
You’re a US resident for tax purposes if:
- You’re a Green Card holder,
- You’re a visa holder, and you meet the substantial presence test.
Otherwise, you’re a non-resident for tax purposes.
Certain visas are exempt from the substantial presence test for a set number of years, including the J-1 visa.
Regardless of your tax resident status, you’re still required to file a US tax return.
STREAMLINED ADVISORY CAN HELP YOU GET BACK INTO TAX COMPLIANCE USING IRS VOLUNTARY DISCLOSURE PRACTICES.
Streamlined Advisory works closely with an experienced network of trusted professionals, including tax attorneys. Once we review your case, we can refer you if the circumstances warrant legal advice.