IRS to End Offshore Voluntary Disclosure Program in September 2018
Co-written by Howard W. Gordon and Alyssa Razook Wan
The Offshore Voluntary Disclosure Program ("OVDP") is a tax amnesty program permitting U.S. taxpayers with unreported foreign accounts and other assets to make a voluntary disclosure to the Internal Revenue Service ("IRS") of such foreign accounts and other assets in exchange for avoiding criminal charges and paying reduced civil penalties. Generally, some form of the OVDP has been in effect from 2009 to present, with the exception of a few months at end of 2011.
IRS reports indicate that since the inception of the OVDP, more than 56,000 taxpayers have entered into the program and paid a total of $11.1 billion in back taxes, interest and penalties.
The IRS has recently announced that it will close the OVDP on September 28, 2018 and has indicated it will continue to use various other tools to combat tax evasion, such as civil examination, criminal prosecution and tax whistleblower leads. Another important tool is the implementation of the Foreign Account Tax Compliance Act ("FATCA"), which has led to increased taxpayer awareness of the requirements to report foreign accounts and cooperation and information sharing with foreign financial institutions and governments.
Taxpayers who might not have been aware of their filing obligations may continue to voluntarily disclose foreign assets under the Streamlined Filing Compliance Procedures. The IRS has not announced a closure for the streamlined procedures at this time, but may do so in the future, particularly in light of the increased information it is receiving due to FATCA and tax whistleblower leads. Only taxpayers who can certify under penalties of perjury that their conduct was non-willful may use the streamlined procedures.
Additionally, the delinquent FBAR (Report of Foreign Bank and Financial Accounts) procedures and the delinquent international information return procedures will remain available for eligible taxpayers after September 28, 2018. Both procedures are for taxpayers who have information reporting failures but no tax noncompliance.
If you have any unreported foreign financial assets and accounts, it is important to contact your tax advisor immediately and promptly take actions to become in full compliance with the U.S. tax laws.
DISCLAIMER: The foregoing summary is for general educational and information purposes, is not legal advice and does not present a detailed or complete presentation of the voluntary disclosure programs available to taxpayers. Each case is unique and requires a careful analysis by one's advisor of the specific facts and circumstances in order to arrive to appropriate advice.