Taxpayers with undisclosed offshore assets urged to step forward
The IRS has announced in a recent news release that it will begin to wind down the 2014 Offshore Voluntary Disclosure Program (OVDP), with the intent of closing the program on Sept. 28, 2018. By alerting taxpayers early on in the process, the IRS intends to provide ample time for those with undisclosed foreign financial assets to utilize the OVDP prior to its closure.
Since 2009, the IRS has offered a variety of offshore voluntary disclosure programs. These programs generally allow qualified taxpayers with previously undisclosed foreign assets to voluntary step forward and disclose those assets. In exchange, the taxpayers generally receive reduced penalty exposure and a promise from the IRS that they will not refer the taxpayer for criminal investigation. These programs have seen heavy use over the years, with approximately 56,000 taxpayers using the OVDP to voluntarily disclose failures to file or pay. The programs have resulted in the collection of approximately $11 billion in back taxes, interest and penalties. However, amidst steadily decreasing usage (only 600 disclosures in 2017), advances in third party reporting and taxpayer awareness, and the implementation of several other methods by which to address prior failures to comply with U.S. information and tax reporting requirements, the IRS has announced that it will close down the program.
Despite the closure of the OVDP, the IRS has indicated that it will continue to combat offshore tax noncompliance with both the carrot and the stick, including tools such as taxpayer education and whistleblower leads as well as through civil examinations and criminal prosecution. The closure of the OVDP does not mark the end of a taxpayer’s ability to remedy prior U.S. information and tax reporting failures either. General options such as the Streamlined Filing Compliance Procedures, delinquent Report of Foreign Bank and Financial Accounts (FBAR), and delinquent international information return submission procedures are potentially available, and will continue to be available after the closure of the OVDP, to non-compliant taxpayers.
Taxpayers with undisclosed foreign assets considering the OVDP as a means by which to voluntarily comply with U.S. information and tax reporting obligations should take particular note of this news release. Those finding the OVDP to be the best means to address prior noncompliance will need to step forward quickly in order to utilize the program prior to its Sept. 28, 2018 closure.