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Offshore voluntary disclosure program ending in September

In a news release, IRS has announced that it will be closing the offshore voluntary disclosure program (OVDP) on Sept. 28, 2018.

Background—OVDP. On Mar. 26, 2009, IRS announced its first OVDP, a form of a tax amnesty program. It permitted U.S. taxpayers with unreported foreign accounts to avoid criminal charges and pay reduced civil penalties by making a voluntary disclosure to IRS. The first OVDP ran through Oct. 15, 2009.

Thereafter, on Feb. 8, 2011, IRS announced a second OVDP. The second OVDP was originally scheduled to close on Aug. 31, 2011, but IRS extended the closing date to Sept. 9, 2011.

On Jan. 9, 2012, IRS reopened the OVDP, which was modified in 2014 and remains in effect today. Unlike the previous OVDPs, the current OVDP does not impose a deadline by which taxpayers must make a voluntary disclosure to be eligible for avoiding criminal prosecution and pay reduced penalties—however, IRS has indicated that it can terminate the program at any time.

According to IR 2018-52, since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily, paying a total of $11.1 billion in back taxes, interest, and penalties.

September closure. IRS has announced that it will close the current OVDP program on Sept. 28, 2018.

IRS noted that, by alerting taxpayers to the closure now, it intends to provide U.S. taxpayers with undisclosed foreign financial assets time to avail themselves of the OVDP before the program closes.

Other enforcement tools and options.  In IR 2018-52, 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.

IRS also reminded taxpayers of 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, similar to the OVDP, may be ended by IRS at some point.

Finally, IRS noted that the implementation of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts of 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, 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.

References: For the IRS offshore voluntary disclosure initiative, see FTC 2d/FIN ¶ V-3829 et seq.; United States Tax Reporter ¶ 72,014.15. IR 2018-52, 3/13/2018

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