OVDP 2013: IRSMedic Updates

As we’ve discussed previously, the Offshore Voluntary Disclosure Program (OVDP) is about your unreported foreign accounts and FBARs. As of June 30, 2013, paper FBARs are no longer accepted and you must electronically filed your FBARs.


We on the ground know that this policy actually make life difficult for expats, immigrants, and anyone else with a legitimate reason to have bank accounts in a foreign country. Many more “ordinary citizens” with enormous problems created by offshore accounts come into our offices than wealthy tax evaders. Ordinary citizens with the same general story: "I just didn’t know.”


The fact of the matter is that right now, as we read the OVDP FAQ, (our only real guidance on some of these issues), we see that:

  • For taxpayers who reported, and paid tax on, all their taxable income for prior years but did not file FBARs, you should file the delinquent FBARs according to the FBAR instructions and include a statement explaining why the FBARs are filed late.


However, OVDP FAQ 33 says that no de minimis amount of unreported income exists—which means, theoretically, that the program is “appropriate” for those who make $20 in interest on accounts worth thousands, but those who reported those interest amounts without filing FBARs are free and clear. IRS agents will sometimes say that these cases are not who the program was “intended” for, but with circumstances as they are, those with offshore accounts and unreported income have little choice but to protect themselves—27.5% looks bad, but if it comes down to an examination, the potential FBAR penalties are crippling.


And so, as we say, it’s about your FBARs. That’s the major problem here—not that you had accounts, not that you had interest — but that you didn’t file FBARs, which gives the IRS massive leverage over you if they care to use it. For many, the gamble that they will never be discovered or will be overlooked, calling themselves “minnows,” is worthwhile.