Since its inception in 2009 (and through the 2012 revised rules), the Internal Revenue Service (IRS) Offshore Voluntary Disclosure Program (OVDP) has been available to provide taxpayers with undisclosed foreign financial assets and income in “offshore accounts” and all required file foreign information returns, an opportunity to square those accounts with IRS before facing serious consequences (up to, and including, criminal prosecution).
Despite the success of the OVDP, in a recent press release the IRS announced that it would be shutting down the program on Sept. 28, 2018. It is highly recommended that taxpayers with knowledge of undisclosed foreign financial assets including accounts with institutional brokerage offices and banks, take full advantage of the OVDP while it remains in effect.
“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.”
Since it began, more than 56,000 taxpayers have made use of the program to voluntarily resolve their tax obligations. According to the IRS, all told those taxpayers paid a total of $11.1 billion in back taxes, interest, and penalties.
A Crackdown on Offshore Assets
In recent years, it has been increasingly more difficult for taxpayers to hide assets in traditional tax havens such as Switzerland and the Cayman Islands. Under new Foreign Account Tax Compliance Act (FATCA) rules and a growing network of inter-governmental agreements (IGAs) between the U.S. and partner jurisdictions, more foreign banks have been willing to provide information on potential non-compliance by U.S. taxpayers.
According to the release, 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 non-compliance remains a top priority of the IRS.”
Presumably, the success of these initiatives is at least part of the reason why the agency is willing to allow the planned sunset of the OVDP.
The release went on to say that while the OVDP is facing its swan song, another program, designed to aid taxpayers who may be unaware of their filing obligations, the Streamlined Filing Compliance Procedures, will continue. However, as with OVDP, the IRS has said it may end the Streamlined Filing Compliance Procedures at some point.
How MBAF Can Help
If you have offshore assets, understand that in the current environment it will be harder and harder to keep those from the IRS. The information is out there, and is getting reported by the foreign banks with increasing regularity.
The announcement of an end date to the OVDP is your official notice that this may be your last chance to disclose foreign financial accounts and assets now, rather than risk detection by the IRS at a later date, and face more severe penalties and possibly even criminal charges.
Taxpayers who think they may need to take advantage of the OVDP before it ends, or the Streamlined Filing Compliance Procedures while they remain in effect, are urged to discuss their situation with the international tax experts at MBAF.
Compliance with the modified Offshore Voluntary Disclosure Program (OVDP), can be complex. If you would like to benefit from our expertise in these areas, or if you have further questions on this Advisory, do not hesitate to contact our International Tax specialists, or call us at 1-800-239-1474.