The United States generally taxes its citizens and resident aliens on their worldwide income. Historically, taxpayers have been required to report foreign bank and financial accounts (FBAR), and to check the box on Schedule B of their personal return to inform the IRS of offshore accounts. However, these regulations were not closely monitored by the IRS and many taxpayers either took advantage of the lax oversight to hide otherwise taxable income overseas or simply taxpayers were not aware of the reporting obligations. The combination of both resulted in a significantly high amount of potential U.S. tax revenue that went uncollected. In order to correct this, the IRS designed the Offshore Voluntary Disclosure Program (OVDP) in 2009 to assist noncompliant taxpayers in becoming current with reporting their offshore accounts and related income.
OVDP is specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. The primary benefit of the OVDP is that it is designed to provide taxpayers with such exposure protection from criminal liability as well as terms for resolving their civil tax and penalty obligations.
Over the years, over 55,000 people have participated in OVDP resulting in compliance. To date these efforts have generated about $10 billion in back taxes, interest and penalties since 2009. In addition, the Streamlined Filing Compliance Procedure, that was developed for taxpayers with non-willful compliance issues, have resulted in the submission of more than 96,000 delinquent and amended income tax returns from the 48,000 taxpayers using these procedures.
The IRS website provides detailed guidance on this subject. Due to the complexity of the filings, a detailed analysis and calculations performed by an experienced tax professional might be necessary.