IRS to End the OVDP in September: Here’s 4 Things You Need to Know About Voluntary Disclosures
Are You a U.S. Taxpayer With Unreported Offshore Accounts? Time is Running Out to Disclose Your Foreign-Held Assets!
On March 13, 2018 the IRS announced that the Offshore Voluntary Disclosure Program (OVDP) will be closing effective September 28, 2018. With only a few months left in the program, taxpayers with undisclosed foreign financial assets may be asking themselves whether now is the time to come forward to make a voluntary disclosure to the IRS. If you find yourself in this situation, there are four things you need to know about the OVDP and the IRS’s decision to bring the program to a close this upcoming September.
1. Underlying Goal of the IRS OVDP
The IRS rolled out its first Offshore Voluntary Disclosure Program in 2009 in an effort bring taxpayers with undisclosed foreign accounts and assets into compliance with U.S. tax laws. Although the 2009 OVDP ended in October of the same year, the IRS launched subsequent voluntary disclosure initiatives, including the 2011 Offshore Voluntary Disclosure Initiative (OVDI) and the 2012 Offshore Voluntary Disclosure Program. All of these initiatives, including the current 2014 OVDP, were designed to crack down on tax evasion and tax avoidance associated with offshore accounts. By offering reduced monetary penalties and the opportunity to minimize the chance of criminal prosecution, the government created a strong incentive for taxpayers to step forward and make a voluntary disclosure of previously unreported foreign financial assets.
2. Rationale for Closing the IRS Offshore Voluntary Disclosure Program
Although the voluntary disclosure programs have been very successful, with over 56,000 taxpayers to date using the programs come into compliance with U.S. tax laws, the IRS has determined that now is the “appropriate” time to close the program. The IRS notes that participation in the OVDP reached a high of 18,000 participants in 2011, but that number has steadily declined to a low of only 600 disclosures in 2017. The IRS further explained that advances in third-party reporting, along with a heightened awareness of the tax obligations and reporting requirements applicable to offshore accounts, contributed to its decision to end the current OVDP. Despite the closure of the program, the IRS asserted in its announcement that combatting offshore tax evasion and noncompliance will continue to remain top priorities of the IRS.
3. Avenues Available to Disclose Offshore Non-Compliance After the OVDP Ends
Although the 2014 OVDP will end in September, the IRS explained that it will continue to offer other alternatives to disclose offshore accounts, including:
- IRS Streamlined Voluntary Disclosure Submission Process
- IRS-Criminal Investigation Voluntary Disclosure Program
- Procedures for Submitting Delinquent FBARs
- Procedures for Submitting Delinquent International Information Returns
4. The OVDP Is Not Always the Right Option for Everyone
While the OVDP closure means that taxpayers looking to make a voluntary disclosure and avoid potential criminal prosecution through the IRS issuance of Form 906 (Closing Agreement) must act quickly, it is important to recognize that the OVDP is not necessarily the best option for everyone. Participants must satisfy strict requirements and highly intrusive disclosure and reporting obligations, along with the payment of back taxes and applicable offshore penalties. Depending upon your individual situation, there may be other IRS programs, including the IRS Streamlined Filing Compliance Procedures, open to you. An experienced tax attorney at Thorn Law Group can evaluate your situation and help you determine the best approach to resolve any offshore account issues that you may have.
To learn more about the various avenues for offshore compliance that may be available to you, contact Kevin E. Thorn, Managing Partner of Thorn Law Group today at 202-349-4033 or email email@example.com before it’s too late. We also encourage you to read our more in-depth article on the topic: IRS OVDP Offshore Disclosure Program Ending Soon!