Alternative to the SFOP is filing under normal assessment procedures or applying under the 2014 OVDP (“Offshore Voluntary Disclosure Program”).
The OVDP is generally reserved for taxpayers who may possess higher risk such as those who may have difficulty in determining or be concerned that their conduct may not be non-willful. If one’s conduct was willful then all bets are off causing civil and potential criminal penalties to apply.
The OVDP applies to those who have been non-tax compliant with regards to one’s offshore assets. Non-compliance may include having not reported an element of gross income or filing international information returns. The procedures for filing an OVDP application are more detailed. The disclosure period for the OVDP is 8 years of past due filings. There is now a 50% miscellaneous offshore or OVDP penalty (previously 27.5%) on the highest value of undisclosed foreign assets during the 8-year disclosure period. The OVDP penalty is in lieu of levying the otherwise civil penalties noted above (excluding the accuracy related penalty) and criminal penalties.
The asset base may exclude assets that were purchased with after-tax funds or from funds that were not subject to U.S. taxation if the assets have not yet produced any gross income or there has been no U.S. taxable event or reporting obligation to disclose. RRSPs/RRIFs and pension/retirement plans whose accumulated income is exempt under the treaty or where there is no other reporting requirement may be excluded from the asset base.