In our last post we discussed the approaching deadline for the Offshore Voluntary Disclosure Initiative which provides amnesty for Orange County taxpayers with undisclosed offshore bank accounts. Although the penalty rates and the 8-year reach of the OVDI may not be particularly pleasant thoughts for Orange County offshore account holders, many offshore account holders are more worried about the implications of the OVDI program regarding domestic income.
Some tax advisers may disagree whether taxpayers should amend their tax return to reflect all of a taxpayer's unreported domestic income as well as unreported foreign income. The OVDI program technically only provides amnesty for crimes associated with offshore tax evasion and the IRS may pursue tax fraud or tax evasion cases against OVDI participants based on domestic transactions. It is important however to remember that tax returns are signed under the penalty of perjury so Orange County taxpayers should make sure that their amended returns are accurate.
Although the OVDI applies exclusively to foreign account matters, an experienced tax litigation attorney will be able to assist Orange County tax payers in filing proper amended returns that accurately reflect all of the taxpayer's income. An experienced tax attorney will also know how to work with the IRS to minimize any possible criminal or civil penalties associated with undisclosed foreign and domestic income. An aggressive stance is sometimes required in these situations and a competent tax law attorney will perform a thorough background investigation into a client's tax matters in order to provide the most effective representation possible.
Source: Forbes, "Does IRS Amnesty Go Beyond Foreign Accounts?," Robert Wood, Aug. 10, 2011