The IRS recently announced that it will end the 2014 Offshore Voluntary Disclosure Program (2014 OVDP) on September 28, 2018.
The 2014 OVDP is the most recent iteration of the IRS’s offshore voluntary disclosure programs that were first announced in 2009. Taxpayers with unreported (closed or existing) bank accounts or foreign financial assets should contact tax counsel as soon as possible to discuss options for coming into compliance.
The IRS cites the significant decline in the number of taxpayers participating in the program as well as an increased awareness of US tax and reporting obligations as reasons for the termination of the program. However, “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,” according to Don Fort, Chief, IRS Criminal Investigations. “Stopping offshore tax noncompliance remains a top priority for the IRS,” and the IRS’s new International Tax Enforcement Group is anticipated to be fully operational this year.
The 2014 OVDP provides a clear civil penalty framework and an assurance that no recommendation of criminal prosecution will be made to the Department of Justice for tax noncompliance and reporting issues related to an accepted voluntary disclosure. In its recent publications regarding the end of the 2014 OVDP, the IRS has indicated that only taxpayers who submit a complete offshore voluntary disclosure (as set forth in 2014 OVDP FAQ 24) by September 28, 2018 will benefit from the program’s limits on civil and criminal penalties. Because there are so many elements of a completed offshore voluntary disclosure that are outside the control of a taxpayer (and of counsel), the sooner a taxpayer begins the process, the more likely it is that taxpayer will be able to meet the September 28 deadline.
The IRS also provides various other disclosure opportunities that will remain after September 28, including the Offshore and Domestic Streamline Compliance Procedures (for non-willful noncompliance), the delinquent FBAR procedures, the delinquent international information return procedures and the long-standing voluntary disclosure procedures. However, there is no guarantee of how long these procedures will be available, and none of these procedures provide the same measure of protection from criminal prosecution as the 2014 OVDP.
As in the past, additional details and clarification may be forthcoming regarding the wind down of the 2014 OVDP and the post-September 28 voluntary disclosure landscape. In fact, the IRS has already enlisted tax practitioners and members of the public to provide feedback on the closure of the 2014 OVDP and future voluntary disclosure practice procedures.