On March 13, 2018, IRS announced the termination of the Offshore Voluntary Disclosure Program (OVDP) as of September 28, 2018 (Notice IR-2018-52). OVDP has been available to Taxpayers that willfully failed to report foreign financial assets and pay all tax due in respect of those assets. The program was designed to protect Taxpayers from potential criminal prosecution and provide terms and resolution for the Taxpayer’s tax and penalty and interest obligations.
Why is the program being closed?
IRS states that Taxpayers have:
had the opportunity to participate in the OVDP since 2009.
increased awareness of offshore tax and reporting obligations.
been warned all along that IRS could increase in penalties, limit the eligibility in the program for all or some Taxpayers or defined classes of Taxpayers – or decide to end the program entirely at any point.
Closing the OVDP does NOT signal a change in priorities for IRS… On the contrary
Terminating the OVDP does not signal a change in IRS’ high priority of stopping offshore tax noncompliance and income tax evasion. This is evidenced by IRS establishing an International Tax Enforcement Group and joining the J5 (Joint Chiefs of Global Tax Enforcement).
IRS continues to enforce offshore tax compliance through tax return filings, FBAR requirements and information it receives under:
Network of Intergovernmental Agreements (IGAs) between the U.S. and partner jurisdictions
Automatic Third-Party account reporting
Department of Justice’s Swiss Bank Program
John Doe Summonses
Information resources sourced from data analytics
What happens to Taxpayers that have significant offshore non-compliance issues after 9/28/18?
IRS states that Taxpayers will continue to have existing avenues to disclose offshore noncompliance after 9/28/18 and that additional information on how to make disclosures after 9/28/18 will be posted on their website: www.irs.gov. IRS is informing Taxpayers:
Who have offshore compliance issues and meet all of the qualifications of the Streamlined Filing Compliance Procedures to use these procedures while they are available. Only Taxpayers that can certify under penalties of perjury that their conduct was non-willful may use the Streamlined Filing Compliance Procedures.
Note that Taxpayers that made a submission under the Streamlined Filing Compliance Procedures, may not make a voluntary disclosure to Criminal Investigation and Taxpayers who make a voluntary disclosure to Criminal Investigation are not eligible to use the Streamlined Filing Compliance Procedures.
The Delinquent FBAR Procedures and the Delinquent International Information Return procedures will remain available for eligible taxpayers after 9/28/18. Both procedures are for taxpayers that have information reporting failures but are income tax noncompliant.
How about amending prior Tax Returns -a/k/a “Quiet Disclosures”?
Amending Tax Returns reporting income from previously undisclosed foreign financial assets without making a voluntary disclosure is known as a “quiet disclosure”. All quiet disclosures will be reviewed by IRS and will be subject to civil or criminal penalties as determined under existing law.
Don’t be a Victim of your own making
IRS will continue to make it more difficult to evade tax by hiding assets offshore. Complete offshore voluntary disclosures must be received or postmarked by September 28, 2018 and may NOT be incomplete. If the Taxpayer does not meet the Criteria of the Streamlined Filing Compliance Procedures, the Delinquent FBAR Procedures or the Delinquent International Information Return Procedures, it is not yet clear how a Taxpayer with significant offshore noncompliance will be able to remedy his/her situation after September 28, 2018.
If you are a Taxpayer with unreported foreign financial assets and have failed to file foreign information returns, consult your specialized Tax Representative NOW as there is urgency to come forward now.