The IRS outlined major changes in its offshore voluntary compliance programs, including several modifications to the standard OVDP procedures as well as changes to the streamlined filing procedures for nonresident taxpayers.

According to the IRS, “The expanded streamlined procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was non-willful. . . . The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States.”  The changes to the streamlined procedures include: (1) eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year; (2) eliminating the required risk questionnaire; and (3) requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct. IRS Commissioner John Koskinen stated, “This opens a new pathway for people with offshore assets to come into tax compliance. The new versions of our offshore programs reflect a carefully balanced approach to ensure everyone pays their fair share of taxes owed. Through the changes we are announcing today, we provide additional flexibility in key respects while maintaining the central components of our voluntary programs.” 

The IRS is also making several modifications to the OVDP, including: (1) requiring additional information from taxpayers applying to the program; (2) eliminating the existing reduced penalty percentage for certain non-willful taxpayers in light of the expansion of the streamlined procedures; (3) requiring taxpayers to submit all account statements and pay the offshore penalty at the time of the OVDP application; (4) enabling taxpayers to submit voluminous records electronically rather than on paper; and (5) increasing the offshore penalty percentage (from 27.5% to 50%) if, before the taxpayer’s OVDP pre-clearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or Department of Justice.

The FAQs on the changes to the OVDP, effective for submissions on or after July 1, are at http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers-2012-Revised.

Text of the FAQs on rules for taxpayers to transition from the OVDP to the streamlined procedures is at http://www.irs.gov/Individuals/International-Taxpayers/Transition-Rules-Frequently-Asked-Questions-FAQs.

The FAQs and further information can be found at http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program.