You’ve submitted your OVDP letter and attachments to the Voluntary Disclosure Coordinator and are reclining in your arm chair watching the “big game” while opening up the day’s mail. The upper left-hand corner of one of the envelopes in your pile is adorned with the IRS’s logo. You open it up. The letter is but a few paragraphs long and as you start glancing at it you breathe a sigh of relief. It says that your disclosure has been preliminarily accepted by CI as timely.

It provides instructions for the second phase: completing and submitting the full voluntary disclosure package to the Austin Campus within 90 days of the date of the timeliness determination (and cooperating with the examiner in resolving all civil liability). You’ve made it this far, but you are uncertain about what is meant by a “full voluntary disclosure submission.” This blog will help make sense of it all.

The voluntary disclosure submission consists of two parts, each of which must be submitted separately. Those parts include the following:

(1) The total amount of tax, interest, offshore penalty, accuracy-related penalty, and, if applicable, the failure-to-file and failure-to-pay penalties, for the voluntary disclosure period must be sent with information identifying the taxpayer’s name, taxpayer’s identification number, and years to which the payments relate. Separate checks should be made for each tax year which would include all applicable tax, interest, accuracy-related penalties, and failure-to-file and failure-to-pay penalties. The offshore penalty should be paid by a separate check. If you cannot pay the total amount of tax, interest, offshore penalty, and other penalties, you must submit a proposed payment plan to the IRS, along with a completed Collection Information Statement (Form 433-A, Collection Information Statement for Wage Earners and Self-employed individuals, or Form 433-B, Collection Information Statement for Businesses). This information must be sent to the Austin campus at the following address: IRS 3651 S. I H 35 Stop 1919 AUSC Austin, TX 78741 (ATTN: OVDP).

(2) The remaining items listed below must be sent to: IRS 3651 S. I H 35 Stop 4301 AUSC Austin, TX 78741 (ATTN: OVDP):

(a) All applicants: Copies of previously filed original (and, if appropriate, previously filed amended) federal income tax returns for tax years covered by the voluntary disclosure.

(b) All applicants: Complete and accurate amended federal income tax returns or original Form 1040 (if delinquent) for all tax years covered by the voluntary disclosure, with accompanying schedules detailing the amount and type of previously unreported income from foreign financial accounts or domestic sources (e.g., Schedule B for interest and dividends, Schedule D for capital gains and losses, Schedule E for income from partnerships, S corporations, estate or trusts and, for years after 2010, Form 8938). For taxpayers who began filing timely, original, compliant returns that fully reported previously undisclosed foreign financial accounts before making the voluntary disclosure for certain years of the disclosure period, copies of the previously field returns for the compliant years.

(c) All applicants: Copy of your completed and signed OVDP letter (including enclosures and attachments) submitted to criminal investigation.

(d) All applicants: A completed Foreign Account or Asset Statement for each previously undisclosed OVDP asset during the voluntary disclosure period.

(e) All applicants: A completed and signed Taxpayer Account Summary With Penalty Calculation.

(f) All applicants: Properly completed and signed agreements to extend the period of time to assess tax (including penalties) and to assess FBAR penalties. These agreements must follow the instructions provided.

(g) All applicants disclosing foreign financial accounts: Copies of filed FBARs for foreign financial accounts maintained during the period of voluntary disclosure. FBARs must be filed electronically.

(h) All applicants: Copies of statements for all financial accounts reflecting all account activity for each of the tax years covered by your voluntary disclosure. For OVDP assets other than foreign financial accounts, provide all relevant documents pertaining to the asset. For example, if a taxpayer has foreign issued life insurance with cash value, provide all documents governing the policy and, if any, all legal and tax opinions issues to the taxpayer relating to the policy.

(i) All applicants disclosing foreign entities: A statement identifying all foreign entities, whether held directly or indirectly, for the tax years included in the voluntary disclosure, and a statement concerning ownership or control of such entities.

(j) All applicants disclosing foreign entities: If foreign entities held OVDP assets, provide complete and accurate information returns (or amended returns, if applicable) required to be filed, including Forms 3520, 3520-A, 5471, 5472, 926, 8865, and 8938 for all tax years included in the voluntary disclosure.

(k) Applicants with estate and gift tax issues: If the taxpayer is a decedent’s estate, or is an individual who failed to report an OVDP asset in a required gift or estate tax return, either as executor or advisor, provide complete and accurate amended estate or gift tax returns (original estate or gift tax returns if not previously filed) for tax years included in the disclosure period correcting the underreporting or omission of OVDP assets.

(l) Applicants with Passive Foreign Investment Company (PFIC) issues: A statement whether the amended or delinquent returns involve PFIC issues during the tax years covered by the OVDP period, and if so, whether the taxpayer chooses to elect the alternative to the statutory PFIC computation that resolves PFIC issues on a basis that is consistent with the mark to market (MTM) method authorized by IRC 1296 but dues not require complete reconstruction of historical date.

Important Points to Keep In Mind:

• The examiner may contact the taxpayer for specific additional information to process the voluntary disclosure.

• The examiner will certify that your voluntary disclosure is correct, accurate, and complete by reviewing your records along with your amended or delinquent income tax returns.

• The examiner will also verify the tax, interest, and civil penalties you owe.

• A complete submission is required for acceptance into the program.

• Taxpayers may submit documents not requiring an original taxpayer’s signature (i.e., bank statements) on a CD or a USB device (flash drive).

Original Post By:  Michael DeBlis