To participate in this program, the taxpayer is required to:

• File amended returns and Form TDF-90-22.1 (FBAR) for each of the 8 preceding tax year.
• Pay any additional tax, interest and the 20% accuracy related penalty.
• Pay the “FBAR-related” penalty equal to 27.5% of the highest account value that existed at any time during the prior eight tax years. These penalties are in lieu of the penalty regimen provided for under the Bank Secrecy Act.
• Other penalties, including the 75% civil fraud penalty, provided for under Title 26.

When considering the OVDP, the following should be considered:

• A determination needs should be made to see whether the taxpayer is at risk for criminal prosecution, either through a referral by the IRS or by the Department of Justice. If the taxpayer is at risk, the OVDP may provide the only safe haven from prosecution.
• Knowledge of whether the taxpayer is under examination or is a candidate for examination in the immediate future (based upon; a large financial transaction, refund claim or required tax return disclosure due to reporting an item of income by a third party that was inadvertently omitted by the taxpayer on his return) is critical.
• Whether the tax return was prepared by the taxpayer or a third party paid preparer may be probative on the issue of willfulness.
• Whether a “reasonable cause” argument can be successfully asserted.
• Answering “no” in response to question 7 (a), part three of Schedule B, coupled with signing the return under penalty of perjury, may create an insurmountable obstacle to avoiding the willful failure to file penalty.
• The potential for imposition of civil penalties in the event an amended or delinquent return or FBAR is submitted as part of a “quiet disclosure.” Undertaking a “quiet disclosure” and the subsequent discovery and examination by the IRS could have catastrophic consequences to the taxpayer. This is because a “quiet disclosure” may be perceived as an independent act of attempting to evade taxes, more than likely subjecting the taxpayer to the “willful” failure to file FBAR penalty, as well as the 75% Civil Tax Fraud Penalty and potential referral to the Criminal Investigation Division for prosecution.
• Before settling on any course of action, taxpayers and practitioners alike should carefully read two recent court decisions: United States v. Williams, No. 10-2230 (4th Cir. 2012) and United States v. McBride, No. 2:09-cv-00378 (D. Utah 2012) which address the issue of “willfulness” in the context of the application of the willful failure to file an FBAR report.
• Tax payer’s aggregate financial account high water mark for each tax for each year to determine whether the FBAR penalty regimen is less than under the OVDP. Where a taxpayer has historically maintained smaller financial accounts, it may make sense, even where there are multiple years of unfiled FBAR reports, to avoid participating in the OVDP, and instead, pursuing an alternative disclosure practice, that may result in a lower penalty than under the OVDP, and in some cases, conclude in the IRS issuing just a warning letter.

If you have not filed your FBAR recently, it may be time to take advantage of the Offshore Voluntary Disclosure Program, and catch up. Depending upon your particular circumstances, you may be able to:

• Disclose your previously undisclosed offshore accounts and income from foreign sources to the Internal Revenue Service.
• Get current with your taxes.
• Minimize penalties and issues with the IRS.

There are several benefits to disclosing your foreign accounts:

• Avoid prosecution.
• Minimize or avoid civil penalties.
• Become compliant with U.S. Tax law.
• Protect your family and the people you love.
• Protect the your wealth.