Offshore Voluntary Disclosure Program to End on September 28, 2018

The Offshore Voluntarily Disclosure Program (OVDP) will end on September 28, 2018 the IRS announced in News Release IR-2018-52.  The program offers an option for taxpayers with undisclosed foreign assets to report those assets with a reduced penalty.

The IRS has offered three OVDP programs since 2009, though the program has become less generous following the revisions in 2011 and 2014.  Over that time the agency reported that 56,000 taxpayers used one of the programs and that the programs collected over $11.1 billion in back taxes, interest and penalties.

The IRS noted that the program has seen a decreasing number of applications after peaking in 2011, falling to only 600 disclosures in 2017.  The news release quotes the Acting Commissioner on the matter:

“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 news release contains an implied warning to those who have not yet come forward. The end of the program doesn’t mean noncompliant taxpayers can breathe easy, emphasizing the tools the agency has available to find noncompliant individuals:

The IRS notes that it will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, Whistleblower leads, civil examination and criminal prosecution. Since 2009, IRS Criminal Investigation has indicted 1,545 taxpayers on criminal violations related to international activities, of which 671 taxpayers were indicted on international criminal tax violations.

“The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts with the use of information resources and increased data analytics,” said Don Fort, Chief, IRS Criminal Investigation. “Stopping offshore tax noncompliance remains a top priority of the IRS.”

The separate Streamlined Filing Compliance Procedures program will continue in effect.  This program is aimed at taxpayers who might not have been aware of their filing obligations.  Eligibility to participate in this program is conditioned on the failure not being willful.

The release reports that this program, which has had 65,000 individuals who have taken advantage of it, still may be ended at some point in the future even though the agency is not ending it at this time.

The release also describes the following options available for taxpayers with issues related to offshore assets.

The implementation of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts of the IRS and the Department of Justice to ensure compliance by those with U.S. tax obligations have raised awareness of U.S. tax and information reporting obligations with respect 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.