IRS to Halt Offshore Voluntary Disclosure Program in September
The IRS will close the 2014 Offshore Voluntary Disclosure Program (OVDP) on Sept. 28, which will give U.S. taxpayers with undisclosed foreign financial assets enough time so that they can still avail of the program.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter, in a prepared statement. “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 program’s closure indicates improvements in third-party reporting and an increased awareness of U.S. taxpayers’ offshore tax and reporting obligations, according to the IRS.
The September deadline is firm. According to the IRS, voluntary disclosures in the 2014 OVDP must be received or postmarked by Sept. 28 and can’t be partial, incomplete or placeholders.
Information about frequently asked questions and answers concerning the OVDP closure
|1.||Is the 2014 OVDP closing?||Yes. The IRS will close the 2014 OVDP effective September 28, 2018. The FAQs for the 2014 OVDP provided that the program may close stating: “[T]he terms of this program could change at any time going forward. For example, the IRS may increase penalties or limit eligibility in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.”|
|2.||Why is the IRS closing the 2014 OVDP?||While the program has been successful in the past, there has been a significant decline in the number of taxpayers participating as well as an increase in awareness of offshore tax and reporting obligations. The IRS has previously stated publicly that the 2014 OVDP would close at some time. Taxpayers have had the opportunity to participate in OVDP since 2009.|
|3.||What is the deadline for making a submission to the 2014 OVDP?||Complete offshore voluntary disclosures conforming to the requirements of 2014 OVDP FAQ 24 must be received or postmarked by September 28, 2018 and may not be partial, incomplete, or placeholder submissions. Practitioners and taxpayers must ensure complete submissions by the deadline to request to participate in the 2014 OVDP.|
|4.||Does the closing of the 2014 OVDP signal a change in IRS priorities towards offshore tax noncompliance?||No. Stopping offshore tax noncompliance and evasion remain top priorities of the IRS. The IRS enforces offshore compliance with tax and FBAR requirements using information received under the Foreign Account Tax Compliance Act (FATCA), the network of intergovernmental agreements between the U.S. and partner jurisdictions, automatic third-party account reporting, and other data-rich sources such as the Department of Justice’s Swiss Bank Program and various John Doe Summonses. The IRS leverages information resources using enhanced data analytics to continue to make it more difficult to evade tax by hiding offshore.|
|5.||How can taxpayers remedy significant offshore noncompliance after September 28, 2018?||Taxpayers will continue to have existing avenues to disclose offshore noncompliance after September 28, 2018. Additional information on how to make disclosures after September 28, 2018 will be posted on irs.gov.|
|6.||Are there any changes to the Streamlined Filing Compliance Procedures with the closure of the 2014 OVDP?||No. The Streamlined Filing Compliance Procedures will remain available after the 2014 OVDP closes. The IRS encourages taxpayers who have offshore compliance issues and meet all of the qualifications of the Streamlined Filing Compliance Procedures to use these procedures while they are available. Only taxpayers that can certify under penalties of perjury that their conduct was non-willful may use the Streamlined Filing Compliance Procedures.|
|7.||Can a taxpayer that uses the Streamlined Filing Compliance Procedures make a voluntary disclosure to Criminal Investigation after September 28, 2018?||No. Once a taxpayer makes a submission under the Streamlined Filing Compliance Procedures, the taxpayer may not make a voluntary disclosure to Criminal Investigation. Likewise, a taxpayer who makes a voluntary disclosure to Criminal Investigation is not eligible to use the Streamlined Filing Compliance Procedures.|
For the rule concerning the differences between the Streamlined Filing Compliance Procedures and the 2014 OVDP, see the heading “Coordination between streamlined procedures and OVDP” on the main Streamlined Filing Compliance Procedures website.
|8.||What happens if a taxpayer simply files amended returns reporting income from previously undisclosed foreign financial assets without making a voluntary disclosure (commonly referred to as a “quiet disclosure”)?||All quiet disclosures will be reviewed and will be subject to civil or criminal penalties as determined under existing law.|
|9.||Will the delinquent FBAR submission procedures and the delinquent international information return submission procedures remain available after the 2014 OVDP closes?||Yes. The delinquent FBAR procedures and the delinquent international information return procedures will remain available for eligible taxpayers after September 28, 2018. Both procedures are for taxpayers that have information reporting failures but no tax noncompliance.|
|10.||I have suggestions to provide the IRS on procedures relating to the IRS’ voluntary disclosure practice after the 2014 OVDP closes. How can I provide my input to the IRS?||Tax practitioners and members of the public with feedback on the closure of the 2014 OVDP and suggestions on future voluntary disclosure practice procedures may provide written input to the IRS at the following email address: email@example.com|
Please use the following in the subject line of any emails: “Suggestion for voluntary disclosure practice after OVDP closes.”
The IRS will not send responses or acknowledgements. Do not send taxpayer identifying information (e.g., name, date of birth, taxpayer identification number, address, etc.) to this email address.
More than 56,000 taxpayers have used the program since its introduction in 2009. They have paid $11.1 billion in back taxes, interest and penalties.
Disclosures peaked in 2011 with 18,000 taxpayers but has declined. In 2017, 600 disclosures were made.
The 2014 OVDP is a modified version of the program that began in 2012, which in turn followed voluntary programs in 2009 and 2011. The OVDPs allow taxpayers to voluntarily resolve former non-compliances concerning foreign financial assets and failures to file foreign information returns.
However, the IRS makes clear its toolbox includes other means of fighting offshore tax avoidance. Those tactics include taxpayer education, tips from whistleblowers, civil audits and criminal prosecution.
The agency, in fact, has indicated 1,545 taxpayers on criminal violations connected to international actions. Of those, 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, head of IRS Criminal Investigation. “Stopping offshore tax noncompliance remains a top priority of the IRS.”
For taxpayers who claim ignorance about filing requirements, the IRS is keeping its Streamlined Filing Compliance Procedures in place for “eligible taxpayers” — though how they qualify for that isn’t defined. However, the IRS says it may also end that program at an as yet undetermined time.
Besides the streamlined procedures, the IRS will continue offering several other options for handling prior compliance failures. Those include:
- IRS-Criminal Investigation Voluntary Disclosure Program
- Delinquent FBAR submission procedures
- Delinquent international information return submission procedures.
More information about the options : –
Options Available For U.S. Taxpayers with Undisclosed Foreign Financial Assets
The implementation of FATCA and the ongoing efforts of the IRS and the Department of Justice to ensure compliance by those with U.S. tax obligations have raised awareness of U.S. tax and information reporting obligations with respect to non-U.S. investments. Because the circumstances of taxpayers with non-U.S. investments vary widely, the IRS offers the following options for addressing previous failures to comply with U.S. tax and information return obligations with respect to those investments:
- Offshore Voluntary Disclosure Program;
Note: The Offshore Voluntary Disclosure Program (OVDP) is closing. Refer to the OVDP FAQsfor an outline of the sunset provisions.
- Streamlined Filing Compliance Procedures;
- Delinquent FBAR submission procedures; and
- Delinquent international information return submission procedures.
The IRS encourages taxpayers to consult with professional tax or legal advisors in determining which option is the most appropriate for them.
Additional information on the Voluntary Disclosure Process after September 28, 2018 is forthcoming.