The IRS announced it will begin to ramp down its Offshore Voluntary Disclosure Program (OVDP) and close it on Sept. 28, 2018. This gives taxpayers with undisclosed foreign financial accounts time to still use the program.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter. “All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.” The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed similar voluntary programs offered in 2011 and 2009. The programs have enabled U.S. taxpayers to voluntarily resolve past noncompliance related to failure to report foreign financial assets and file foreign information returns.
Unlike the previous OVDPs, the current program doesn’t impose a deadline that taxpayers must meet to make the disclosure and be eligible for avoiding criminal prosecution and paying reduced penalties. However, the IRS has indicated that it can terminate the program at any time.
The tax agency stated that complete offshore voluntary disclosures must be received or postmarked by September 28, 2018, and can’t be partial, incomplete, or placeholder submissions. Practitioners and taxpayers must ensure complete submissions by the deadline to request to participate in the OVDP.
Since the program’s initial launch, more than 56,000 taxpayers have used the voluntary disclosure programs, paying a total of $11.1 billion in back taxes, interest and penalties.
Other Enforcement Tools and Options
The IRS stated that it will continue to use tools beyond voluntary disclosure to combat offshore tax avoidance, including taxpayer education, whistleblower leads, civil examination and criminal prosecution.
The tax agency also noted it has a separate program, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations. These procedures are currently available to eligible taxpayers but, like the OVDP, may be ended by the IRS at some point.
Finally, the IRS noted that the passing of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts of the IRS and the Department of Justice to ensure tax compliance have raised awareness of reporting obligations related to undisclosed foreign financial assets. Because the circumstances of taxpayers with foreign financial assets vary widely, the IRS will continue offering the following options for addressing previous failures to comply with U.S. tax and information return obligations with respect to those assets:
- IRS-Criminal Investigation Voluntary Disclosure Program,
- Streamlined Filing Compliance Procedures,
- Delinquent FBAR submission procedures, and
- Delinquent international information return submission procedures.
If you have an unreported foreign account and are interested in the IRS disclosure program, contact your tax advisor about how to proceed.
For a no-obligation discussion on the possible impact and steps you should take now, contact Lien Le, the head of our International Tax practice.