On March 13, 2018, the Internal Revenue Service (the “Service”) announced its plan to close its 2014 Offshore Voluntary Disclosure Program (OVDP) effective Sept. 28, 2018. The Service indicated that its announcement was intended to provide notice to taxpayers early enough to allow them to take advantage of the program before the closing date.
The current OVDP began in 2014 and is a modified version of prior programs offered in 2012, 2011, and 2009. These programs have generally allowed United States taxpayers to voluntarily resolve past non-compliance related to foreign financial assets, including non-compliance related to foreign information returns.
Since the first OVDP in 2009, more than 56,000 taxpayers have used one of the programs. Those taxpayers remitted approximately $11.1 billion in unpaid taxes, interest and penalties.
Criminal Indictments: Numerous And Likely To Continue
While the number of disclosures under the OVDP has decreased in recent years, the Service has experienced advances in third-party reporting and both civil and criminal actions have increased awareness of U.S. taxpayers regarding offshore tax and reporting obligations.
Since the OVDP began in 2009, the Service’s Criminal Investigation Division has indicted more than 1,500 taxpayers related to international activities, including 671 taxpayer indictments for international criminal tax violations.
The Service’s announcement reaffirms its commitment to offshore enforcement and states: “[t]he 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 . . . Stopping offshore tax noncompliance remains a top priority of the IRS.”
Taxpayer Options Remain
The current OVDP remains an option until September 28, 2018. This allows sufficient time for taxpayers to take quick action if the OVDP is a viable option. In addition, the Streamlined Filing Compliance Procedures, which constitute a separate program for taxpayers with specific fact-situations related to international non-compliance matters, reportedly will remain in effect. There are strict and specific requirements for both the soon-to-close OVDP, and the Streamlined Program. Taxpayers with unreported foreign financial accounts and similar issues now face a very real deadline that may significantly limit their future options.
Contact a member of Varnum’s Voluntary Disclosure Team for more information.