IRS To End Offshore Voluntary Disclosure Program

by Mike Godfrey, Tax-News.com, Washington

14 March 2018

The Internal Revenue Service has announced plans to close the 2014 Offshore Voluntary Disclosure Program (OVDP) from September 28, 2018.

By alerting taxpayers in advance, the IRS intends that any US taxpayers with undisclosed foreign financial assets have time to use the OVDP before the program closes.

"Taxpayers have had several years to come into compliance with US 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 the OVDP's initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. All told, those taxpayers paid a total of USD11.1bn in back taxes, interest, and penalties. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness from US taxpayers of their offshore tax and reporting obligations.

The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number has steadily declined through the years, falling to only 600 disclosures in 2017.

The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed voluntary programs offered in 2011 and 2009. The programs have enabled US taxpayers to voluntarily resolve past non-compliance related to unreported foreign financial assets and failure to file foreign information returns.

In a March 13 notice, the IRS emphasized that it would continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, whistleblower leads, civil examination, and criminal prosecution. 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 noncompliance remains a top priority of the IRS."

A separate program, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations, has helped about 65,000 additional taxpayers come into compliance. The Streamlined Filing Compliance Procedures will remain in place and available to eligible taxpayers. As with OVDP, the IRS has said it may end the Streamlined Filing Compliance Procedures at some point.

"The implementation of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts of the IRS and the Department of Justice to ensure compliance by those with US tax obligations have raised awareness of US tax and information reporting obligations with respect to undisclosed foreign financial assets," said the agency. "Because the circumstances of taxpayers with foreign financial assets vary widely, the IRS will continue offering [a range of] options for addressing previous failures to comply with US tax and information return obligations with respect to those assets."

These include the IRS-Criminal Investigation Voluntary Disclosure Program, Streamlined Filing Compliance Procedures, delinquent FBAR submission procedures, and delinquent international information return submission procedures.

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