Questions on Eligibility
Questions on Eligibility
What are the criteria for eligibility in OVCI?
A - Generally, a taxpayer who has participated in offshore payment card or offshore financial arrangements is eligible to participate in OVCI if:
(a) The request to participate is timely (generally, before the IRS has the taxpayer under civil examination or criminal investigation and before the IRS has information that directly points to the taxpayer's compliance problems);
(b) The taxpayer is not a promoter of abusive tax schemes;
(c) The taxpayer is not involved in other illegal activity.
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When exactly is a request considered timely?
A - The taxpayer's written request to participate in the Offshore Voluntary Compliance Initiative must be received by April 15, 2003, and before:
(a) The IRS has initiated a civil examination or criminal investigation of the taxpayer, or has notified the taxpayer that it intends to commence such an examination or investigation;
(b) The IRS has received information from a third party (e.g., informant, other governmental agency, or the media) alerting the IRS to the specific taxpayer's noncompliance;
(c) The IRS has initiated a civil examination or criminal investigation that is directly related to the specific liability of the taxpayer;
(d) The IRS has acquired information directly related to the specific liability of the taxpayer from a criminal enforcement action (e.g., search warrant, grand jury subpoena).
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How will I know if I have been identified for a criminal investigation?
A - Under OVCI, the IRS is undertaking to notify you within 30 days of receipt of your request whether you are preliminarily determined to be eligible for participation in the Initiative or, based on information available to the IRS, are ineligible to participate.
Upon receipt of your request, and prior to sending the acknowledgment letter, the IRS will be checking its records to see, among other things, whether a civil examination or criminal investigation of you has been initiated, whether it has received information regarding your specific non-compliance with the tax law or your specific tax liability, and whether it has initiated an examination or investigation of any of the entities listed in your request. If your acknowledgement letter advises you that you have been preliminarily determined to be eligible to participate in the Initiative, you will know that the above checks did not reveal that you have been identified for investigation.
On the other hand, if you are notified that you have been determined to be ineligible for participation in the Initiative, the letter will not specify the reason for your disqualification. You will simply know that one or more of the exceptions has been determined to apply to you.
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If you reject my request, why won't you tell me the reason?
A - In rejecting requests we don't state the reason because in very limited circumstances revelation of the existence of a pending IRS matter could jeopardize an investigation or the safety of the Criminal Investigation agents or persons involved.
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Who would be considered an ineligible promoter?
A - A taxpayer who has promoted or solicited, or, in any way, facilitated the participation of others (other than members of the taxpayer's immediate family, or of individuals for whom the taxpayer did not receive compensation of more than a nominal amount) in arrangements to avoid taxation by using offshore payment cards, offshore financial arrangements, or any other abusive transaction, domestic or offshore, such as arrangements based on arguments refuted by the IRS in The Truth About Frivolous Tax Arguments found at http://www.irs.gov/pub/irs-utl/friv_tax.pdf .
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What illegal activity would make a taxpayer ineligible?
A - A taxpayer who has derived income from illegal sources during the years in which the taxpayer seeks to participate in OVCI, such as drug trafficking, or embezzlement, or has used the offshore payment card or offshore financial arrangement to support or, in any way, facilitate illegal activities not related to taxes would be ineligible to participate in OVCI.
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If I don't have the ability to full pay can I still submit a request?
A - Yes. Although the Initiative requires the taxpayer to fully pay the tax liabilities, including applicable penalties and interest for all years covered by OVCI, as well all other unpaid, previously assessed liabilities, it is possible to submit a request that includes other payment arrangements acceptable to the IRS.
However, the burden will be on the taxpayer to establish inability to pay, based on full disclosure of all assets and income sources, domestic and offshore under the taxpayer's control. Assuming that the IRS determines that the inability to fully pay is genuine, the taxpayer must work out other financial arrangements, acceptable to the IRS, to resolve all outstanding liabilities, in order to be entitled to the penalty relief included in the Initiative.
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If the IRS determines a taxpayer may not participate in OVCI, does the taxpayer have appeal rights?
A - No.
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I have offshore transactions, but not payment cards. Am I eligible for this program?
A - Yes. Under Revenue Procedure 2003-11, the OVCI is made available to taxpayers who have avoided taxation through financial arrangements that in any manner rely on the use of offshore payment cards (including credit, debit, or charge cards) issued by banks in foreign jurisdictions or offshore financial arrangements (including arrangements with foreign banks, financial institutions, corporations, partnerships, trusts, or other entities). Thus, anyone involved in an offshore financial arrangement is eligible for the Initiative, whether or not the arrangement involved a payment card.
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I do not have an offshore credit card or other offshore arrangement, but I believe I am involved in another type of abusive scheme. Who can I contact to discuss my situation?
A - You can come forward under IRS Criminal Investigation's voluntary disclosure practice, as described in IRS News Release-2003-135, and potentially avoid prosecution for conduct you voluntarily disclose. By filing amended returns and paying the tax before the IRS commences a civil examination or criminal investigation, you can also minimize your liability for interest and reduce the likelihood of certain penalties being asserted. If you are interested in making a voluntary disclosure, you may call the OVCI Unit in Philadelphia at 215-516-3537 or send an e-mail to VCI@irs.gov, and they will refer you to the Criminal Investigation (CI) voluntary disclosure contact in your area.
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I have an offshore arrangement, but I also failed to report some domestic income this year unrelated to my offshore activity? May I participate?
A - Yes. You must report all of your domestic income as part of this initiative. Because you are filing an amended return that you are declaring to be true, correct, and complete under penalties of perjury, it is important that you correct any substantial errors on the original return that are known to you.
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If my partnership is under examination am I still eligible for this program? Are all of the partners eligible?
A - If your partnership is already under examination, you and your partners are not eligible for participation in the initiative because the IRS has already initiated an investigation that is directly related to your specific liability.
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I'm a foreign student with an offshore credit card. Do I need to register for this program or seek additional information?
A - Generally, foreign students with offshore credit cards do not need to apply for inclusion in the OVCI, because they have no U.S. tax liability. However, if the foreign student has substantial unreported U.S. source income that has been concealed through an offshore financial arrangement that is a situation where participation in the Initiative is appropriate.
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If the promoter I worked with is under investigation am I still eligible?
A - Yes. As long as you personally meet the eligibility requirements of the Revenue Procedure, the status of the promoter has no bearing on your ability to participate in the Initiative. The situation would be different if the promoter has already provided to the IRS information about your involvement in offshore financial arrangements that demonstrates your non-compliance with Internal Revenue laws. In that case you would not meet one of the eligibility requirements because the IRS would have already received information from a third party (the promoter) alerting the IRS to your non-compliance.
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Other FAQ Topics
Revised January 13, 2003
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