The IRS Offshore Voluntary Disclosure Program (OVDP) offers taxpayers with unreported income from foreign financial accounts a chance to come into compliance with the law. The program benefits taxpayers by offering lower penalties and eliminating the threat of criminal prosecution for failing to file Foreign Bank Account Reports (FBARs).
Failure to file an FBAR can result in both criminal and civil penalties. The criminal penalties can be fines of up to $250,000 and five years in jail. The civil penalties for a willful failure to file an FBAR can be up to the greater of $100,000 or 50 percent of the account balance.
To avoid these onerous penalties, taxpayers can come into compliance in a variety of ways. They can file the past due returns quietly, which is known as a quiet disclosure. They can use the Streamlined Filing Compliance Procedures, or the OVDP, depending on the circumstances of their offshore bank account problems.