In the news release issued today, March 13, 2018, the Internal Revenue Service announced that the Offshore Voluntary Disclosure Program (OVDP) will close on September 28, 2018. The deadline gives U.S. taxpayers with non-compliant undisclosed foreign accounts and assets six months to come forward and use the voluntary disclosure program before it closes.
U.S. tax laws require U.S. taxpayers to annually report certain foreign financial assets. A U.S. person with an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in a foreign country must file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. Penalties for willful failure to file FBARs can reach 50% of the account value per violation, and, in more egregious cases, failure to report foreign accounts and income can lead to a 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.
OVDP allowed non-compliant taxpayers to resolve their failure to report foreign assets without criminal prosecution and at a specified penalty rate, which was less than potential FBAR and other non-reporting penalties. Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. Those taxpayers paid a total of $11.1 billion in back taxes, interest and penalties.
“Taxpayers have had several years to come into compliance with U.S. 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.” The IRS will continue to use all available tools, including third-party reporting, FATCA, whistleblowers, civil audits, and date analysis to identify non-compliant taxpayers. “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 whose failure to file was non-willful, 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.
Former IRS attorneys at Holtz, Slavett & Drabkin, APLC, have successfully represented many taxpayers in the OVDP and Streamlined Filing Compliance Procedures, as well as audits, investigations and court cases, involving FBARs and unreported foreign assets. To schedule a consultation, please contact us at 310-550-6200.