2016 Update IRS Amnesty Program
IRS Announces Modifications to its Offshore Voluntary Disclosure Program
The IRS recently announced significant changes to the Offshore Voluntary Disclosure Program (OVDP), explaining that these changes are “a continuation of the program introduced in 2012 with modified terms.” This updated offshore tax amnesty program is referred to as the 2014 OVDP.
The IRS introduced the OVDP in 2009 in an effort to increase the numbers of taxpayers voluntarily coming forward to report their previously undisclosed offshore financial accounts. In 2011, the IRS developed the Offshore Voluntary Disclosure Initiative, and in 2012 the IRS launched a third generation program, the 2012 OVDP.
The IRS has explained that the 2014 modifications are based upon past experience and feedback on the offshore programs from both tax professionals and the National Taxpayer Advocate. The changes are designed to encourage taxpayers living in the U.S. and residing abroad to come forward and report their undisclosed foreign accounts and assets.
With the recent implementation of the Foreign Account Tax Compliance Act (FATCA) and the government’s increased offshore account enforcement activities, taxpayers’ unreported foreign accounts are at an increased risk of disclosure to the IRS. Individuals seeking to limit their exposure to serious penalties and avoid criminal prosecution should discuss their situation with an experienced DC tax lawyer. The attorneys at Thorn Law Group have over thirty years of combined experience helping taxpayers in the D.C. region, across the U.S. and abroad resolve serious tax matters and come into compliance with their tax obligations.
Overview of 2014 OVDP Modifications
The 2014 OVDP sets forth several significant changes to the IRS offshore voluntary disclosure program. In an effort to increase participation in the program, the IRS has expanded the streamlined filing process to cover a wider range of U.S. taxpayers whose failure to report their offshore accounts was not willful in nature. Under the revised program, certain taxpayers living in the U.S. will now be permitted to take advantage of the streamlined process. Additionally, more taxpayers living abroad will be eligible to participate in the program.
The modifications to the streamlined process include:
- Eliminating the $1,500 cap on unpaid tax liabilities per year;
- Eliminating the risk questionnaire;
- Adding a requirement that taxpayers must certify that their failure to report offshore accounts and assets was not willful;
- Providing a waiver of all penalties for non-willful violations to eligible taxpayers living outside of the U.S.; and
- Limiting the penalty for non-willful violators living in the U.S. to five percent of the foreign assets that were not properly reported to the IRS
In addition to these modifications, the 2014 OVDP also sets forth significant changes impacting taxpayers who acted willfully to shield their foreign financial accounts from the IRS. Willful violators seeking to participate in the OVDP will now have to comply with several new terms and conditions, including:
- Submitting more information to the IRS when applying to the program;
- Providing the IRS with all account statements; and
- Paying the offshore penalty when submitting an OVDP application
Additionally, if it becomes public that the IRS or the Department of Justice has launched an investigation of the bank where the taxpayer’s accounts are held before the taxpayer submits a pre-clearance request to the IRS, the taxpayer will be subject to increased penalties.
Take Action Now
Taxpayers with unreported foreign financial accounts should take action now to resolve their offshore reporting issues and meet their U.S. tax obligations. A tax lawyer in our Washington D.C. office can help. Our legal team will thoroughly review your situation to determine all options that may be available to bring your foreign financial accounts and assets into full compliance with U.S. tax laws and regulations.