August 29, 2018
IRS closes OVDP, but streamlined procedures continue
Over the last decade, offshore account compliance has been at the top of the IRS priority list. The first of the Offshore Voluntary Disclosure Programs began in 2009. The strong interest led the IRS to create several iterations over the years.
As of late 2016, the IRS reported that 55,800 taxpayers had come into compliance through one of the programs and had paid more than $9 billion dollars in back taxes, penalties and interest. In the last two years, the number of applications have dropped, which has led the Service to close the program at the end of September. What options will exist after it goes away?
Streamlined Offshore Foreign/Domestic Procedures
Even with the closure of OVDP, there remain two routes for correcting past mistakes when it comes to offshore account disclosure. These are important programs that can limit penalty assessments and avoid potential criminal charges for willful failure to disclose accounts and offshore income.
- File amended or delinquent returns
- Resolve back tax and penalty assessments
- Negotiate the terms for repaying the obligation
Updates to these procedures over the years have removed the $1,500 tax threshold and extended the eligibility to U.S. taxpayers who reside abroad.
To use the foreign or domestic program, a taxpayer or estate must have a Taxpayer Identification Number and certify that non-willful conduct or a mistake was behind the failure to pay all taxes, report worldwide income or submit information returns (for example FBARs, now called FinCEN Form 114). If the IRS has already started an investigation into undisclosed foreign financial accounts, this program is no longer available.
International financial institutions are sharing more information than ever with the IRS. If offshore account disclosure issues arise, take quick action to admit mistakes and get back into compliance as soon as possible.