Opting Out of Voluntary Disclosure

The analysis of whether to join or opt out of the Offshore Voluntary Disclosure Program is complicated. A careful analysis of all applicable statute of limitations is required. If there is fraud, there is an unlimited statute, whereas joining the program and not opting out, limited the number of years at issue. However, there is a significant likelihood that the participant could qualify for far lower penalties outside of the program than the current penalty structure of the Voluntary Disclosure Program; the OVDP does not give the IRS discretion to reduce the program’s penalties. Therefore, the only way to contest the mandatory penalties, is to opt out of the program.

The decision to opt out should not be taken lightly and should be made upon advice of a tax attorney familiar with International and Criminal Tax Matters. Once an Opt Out is made, it is irrevocable. An individual participating in the voluntary disclosure must understand that if they opt out of the Voluntary Disclosure Program must understand that he or she could be subject to criminal prosecution, as well as, willful and non-willful penalties to the IRS. Furthermore, risks include, and are not limited to, the IRS assessing civil fraud penalties equal to 75 percent of the amount of tax underpayment, an expanded scope of the IRS audit, and much more.

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