OVDI Explained
To complement the IRS Offshore Voluntary Disclosure Initiative (“OVDI”), the New Jersey Department of Treasury, Division of Taxation is offering its own offshore disclosure program, the Voluntary Compliance Initiative (“NJOVCI”). NJOVCI provides an opportunity for NJ businesses and individuals to disclose unreported offshore income in consideration of reduced tax penalties and the avoidance of criminal tax exposure.
The IRS has made offshore tax evasion a top enforcement priority. Any time during the year a U.S. citizen or resident has offshore financial accounts totaling more than $10,000 in the aggregate, they must notify the IRS about those offshore accounts. To notify the IRS about offshore accounts, a taxpayer files the FinCEN Form 114, formerly TD F 90-22.1, the Report of Foreign Bank and Foreign Accounts (FBAR). If any offshore income is associated with the accounts, the taxpayer reports the income on their individual or business tax return.
The IRS offshore disclosure program allows non-compliant taxpayers to disclose unreported offshore accounts and income. A New Jersey individual or business participating in the program must also participate in the NJ Offshore Voluntary Compliance Initiative.
If NJ taxpayers accept the NJ Offshore Voluntary Compliance Initiative, the NJ Division of Taxation will waive all civil penalties, including the 50% civil fraud penalty. Instead, the Division of Taxation will reduce tax penalties and assess a 5% late payment penalty and 5% amnesty penalty.
Some of the requirements for NJ’s offshore disclosure program are as follows:
- Disclosing the tax type and the years of non-compliance;
- Providing the Division of Taxation with both original or amended federal and NJ returns covering the years of non-compliance;
- Providing the NJ Division of Taxation an explanation to support the application into the offshore program and
- You are executing a certification acknowledging that you will cooperate with the Taxation Division to establish the correct tax liability.
Completing the NJ offshore disclosure is essential to reduce tax penalties, become compliant, and avoid criminal prosecution. To participate in the offshore disclosure program, you must make your application before being contacted by the IRS or NJ.
Delays are not an option, so contact tax attorney Todd S. Unger, Esq., and find out how to avoid prosecution of unreported offshore accounts (877) 544-4743.