With the IRS recently announcing that it intends to officially close the Offshore Voluntary Disclosure Program (“OVDP”) by September 28, 2018, it has formally issued a “last call” for taxpayers with willful foreign reporting deficiencies. According to the IRS, the announcement of the coming end to the OVDP “reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.” In other words, the IRS believes that taxpayers should now be aware of their reporting obligations and that it has sufficient access to foreign records/information to eventually identify many taxpayers.
Some readers may recall my prediction—in a post almost one year ago to the day—that OVDP program statistics indicated, to me at least, that the OVDP’s “days were limited” and that it likely would not be around significantly longer. See An Update on International Tax Enforcement. That prediction has come to fruition with the IRS’s recent announcement.
The OVDP has been perhaps the most successful program in IRS history. In a nutshell, it offers criminal amnesty (the government agrees not to prosecute) in exchange for a qualifying taxpayer coming forward and disclosing their previously unreported foreign assets or income. Since its initial launch in 2009, more than 56,000 taxpayers have come into compliance through the program (not including the 65,000-plus taxpayers who have come into compliance through the related Streamlined Filing Compliance Procedure). All told, OVDP disclosures have resulted in payments of $11.1 billion in back taxes, interest and penalties related to previously undisclosed foreign accounts.
The IRS has warned that those who have not come forward continue to face substantial risks and exposure. In recent years, the IRS Criminal Investigation Division has initiated indictments of more than 1,500 taxpayers on criminal violations related to international activities. Thousands more have come under civil examination. Billions of dollars in tax and penalty assessments have resulted from these enforcement activities.
In its announcement, the IRS specifically warned that “By alerting taxpayers now, [it] intends that any U.S. taxpayers with undisclosed foreign financial assets have time to use the OVDP before the program closes.” The IRS’s official statement indicated that:
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program . . .” “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.”
While it is closing the OVDP, the IRS is not currently closing its Streamlined Filing Compliance Procedure program for taxpayers with non-willful violations. However, it continues to indicate that the Streamlined program may end at any time as well. Its closure is likely now only a matter of time—whether that will be months or years, though, remains to be seen.
With the close of the OVDP looming, taxpayers with undisclosed foreign assets may have a short window of opportunity left to come into compliance under current IRS programs. As a result, taxpayers with foreign reporting issues should—now more than ever—consult with tax counsel to determine their options.
For prior related posts, see: IRS Offshore Compliance: New Stats Indicate a Slow in OVDP Submissions,
TIGTA Report Critical of the Offshore Voluntary Disclosure Program, Finds that the IRS Should Assess More FBAR Penalties, Government Report Finds that Improvements are Needed in the Offshore Voluntary Disclosure Program,