The IRS has announced that it will end its Offshore Voluntary Disclosure Program (Program) on September 28, 2018. U.S. taxpayers with undisclosed foreign financial assets still have time to take advantage of the Program before it closes later this year. See our prior Tax Law Alert on the Program here.
The Program allows U.S. taxpayers to voluntarily resolve past non-compliance related to unreported foreign assets.
Under the Program, taxpayers that have failed to report foreign financial assets are able to take advantage of a one-time penalty equal to 27.5 percent of the highest aggregate offshore account balance for the most recent tax years. In contrast, if a taxpayer failed to report foreign accounts and did not disclose them via the Program, the taxpayer could be subject to penalties in a flat amount of $10,000 or $100,000 per year, or up to a maximum of 50 percent of the account balance per year, depending on the circumstances. These penalties can often exceed the entire value of the undisclosed foreign assets.
Despite the end of the Program, the IRS will continue to offer certain other options for addressing previous noncompliance with U.S. tax and information return filing obligations with respect to foreign financial assets, including the Streamlined Filing Compliance Procedures, for those who qualify.