What is a Voluntary Disclosure Agreement? A voluntary disclosure agreement (VDA) is an arrangement between the Internal Revenue Service and taxpayers who voluntarily disclose information about their offshore accounts. The VDA may provide for reduced penalties, if any, in return for full disclosure of account information.
What are the Benefits of a VDA for Businesses and Individuals Alike?
The benefits of a VDA for businesses and individuals alike are that it may provide reduced penalties or no penalty at all in return for full disclosure of account information. This helps businesses and individuals avoid criminal prosecution and hefty fines.
How Can you Go About Obtaining a VDA?
To obtain a voluntary disclosure agreement, taxpayers must submit to the IRS through an authorized representative (attorney, CPA) Form 14457 and attachments detailing their account information, including tax returns from the last eight years. The taxpayer will then be contacted by someone in offshore enforcement, after which they will schedule meetings with them where additional documents are requested. If everything seems in order, there is usually one more meeting before the closure of the case within 90 days time frame.
What Are Some Risks Associated With Entering Into A VDA Agreement?
The risks associated with entering into a VDA agreement are that the taxpayer may have to pay all back taxes, interest, and penalties on top of forfeiture of their accounts and possible criminal prosecution.
How Does the Voluntary Disclosure Program Work, and Who is Eligible to Participate in It?
The voluntary disclosure program (VDP) is a program offered by the IRS which allows taxpayers to come forward and disclose their foreign assets without fear of criminal prosecution. Eligible taxpayers have not filed tax returns (FBAR) or paid taxes on their foreign income. To be eligible for the VDP, taxpayers must meet the following criteria:
- The assets must be from a foreign country and not reported on tax returns.
- The taxpayer must have failed to report the assets on a foreign or domestic tax return.
- The taxpayer must not have filed a voluntary disclosure submission in the past.
Can Taxpayers Still Come Forward and Disclose Their Foreign Assets After the Implementation of FATCA?
No, taxpayers can no longer come forward and disclose after implementing FATCA (the Foreign Account Tax Compliance Act). This is because its enactment means foreign financial institutions will automatically report any suspicious activity in U.S.-linked accounts to authorities. It results in increased scrutiny for those who attempt such disclosures without proper authorization from the IRS. However, the VDP is still available to those who meet its eligibility criteria.
The Voluntary Disclosure Program is an IRS program that allows taxpayers to come forward and disclose their foreign assets after implementing FATCA (the Foreign Account Tax Compliance Act). This article has provided you with important information about what a VDA agreement entail, how it can benefit your business or individual needs, and some risks associated with entering into such agreements. The article also discusses how to obtain a VDA for your business or individual needs and what some of the benefits of doing so are. If you have any further questions, please consult with an experienced tax attorney or CPA.
