The Internal Revenue Service released the Offshore Voluntary Disclosure Initiative
that allows you to come clean and report all of your overseas accounts since 2003 if you have not filed the correct FBAR forms yet. The OVDI required that you offer copies of your previous tax returns, and reconcile those returns as needed to file the entire TD F 90-22. It also requires that as soon as this is complete you must sign documents that allow IRS to extend the tax assessing time period, pay 20% tax penalty on all underpayments for all years, and pay failure to file and failure to pay penalties. You must then pay any other penalties that apply up to and including 25% of the whole balance of all offshore accounts. Once you have paid all the penalties, taxes and fines you may then file a form to close out the case on IRS form 906. However, if you are experiencing criminal or civil inspection you are not eligible to take part in the OVDI program.
The FBAR forms need to be filed every year as soon as you have opened offshore accounts. The penalties are brutal and can even result in prison time if you do not report accurately. The most ordinary way to get in trouble with the FBAR forms is to begin filing forms before considering previous accounts, filing past due FBAR Forms in different envelopes in an effort to evade notice or filing more than 8 different forms with letters explaining that you did not know you were required to file the FBAR Forms.
Despite your tax responsibility, you are still required to file the right FBAR Penalty within the filing deadline in order to avoid penalties. Unless you enjoy serving prison time you should not try to get out of filing FBAR forms. Because the guidelines and rules concerning the filing requirements are complex it is suggested that you acquire professional guidance in order to get around harsh penalties. Because of the scrutiny on offshore accounts, it is unlikely that you will be able to stay unnoticed if you have never filed a FBAR in the past. With the Offshore Voluntary Disclosure Program, it is best that you report all that you have at this time in an effort to steer clear of future tax issues.