The Internal Revenue Service (IRS) reminded taxpayers yesterday that they have until September 28 to apply for the Offshore Voluntary Disclosure Program (OVDP). In March, the IRS announced the program would end on the 28th of this month. The IRS has made clear that it will continue to hold taxpayers with undisclosed offshore holdings accountable after the program closes.
The IRS announcement of September 4 contained lots of information but I found the following two items of particular importance:
- Since the March announcement, the IRS has not received any public comments addressing a continued need for the OVDP. The IRS stated it “will maintain a pathway for taxpayers who may have committed criminal acts to voluntarily disclose their past actions and come into compliance with the tax system. Updated procedures will be announced soon.”
I find it interesting to see the IRS will be continuing some type of “pathway” for taxpayers who have not yet entered OVDP and who will miss the deadline. This tells me that IRS has a cornucopia of data still to mine but that it knows it is on the trail of taxpayers with criminal tax exposure. Likely this information is coming from institutions that joined the Swiss Non-Prosecution program along with the Foreign Account Tax Compliance Act (FATCA) data sent from foreign countries. In addition, Don Fort was appointed Chief of Criminal Investigation (CI) for the IRS in June last year. He’s quickly making his presence known as the IRS’ top law enforcement officer and has made it known that CI is actively using data mining in its tax investigations. CI’s creation of a Nationally Coordinated Investigations Unit (NCIU), the goal of which is to use data to help better select criminal investigations, has international tax enforcement as a top priority.
OVDP: Getting In Under the Wire
The IRS announcement is not 100% clear about exactly what must be done by September 28 to join the OVDP. Please note that per IRS FAQs regarding the sunset provisions of the 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. From what I can tell, access to the 2014 OVDP FAQs is here.
- The IRS also stated that “[a] separate program, the Streamlined Filing Compliance Procedures, for taxpayers who may have been unaware of their filing obligations, has helped about 65,000 additional taxpayers come into compliance. These streamlined procedures will continue to be available for now, but as with OVDP, the IRS has said it may end this program too at some point.” (Emphasis mine).
Are the Streamlined Offshore Procedures Closing Soon, Too?
The IRS has been making noises in the recent past about closure of the Streamlined procedures. Thus, taxpayers that may be able to use a Streamlined filing to regularize their tax reporting should be moving quickly to make their submissions. In my experience, the Streamlined Foreign Offshore Procedure has been a great success for taxpayers who entered the program, allowing them to regain tax compliance without payment of any penalties. I have provided a summary of the Streamlined procedures here.
Below is other information from the IRS announcement:
Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used the various terms of the program to comply voluntarily with U.S. tax laws. These taxpayers with undisclosed offshore accounts have paid a total of $11.1 billion in back taxes, interest and penalties. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.
The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number steadily declined through the years, falling to only 600 disclosures in 2017.
Separately, the IRS continues to combat offshore tax avoidance and evasion using whistleblower leads, civil examination and criminal prosecution. Since 2009, 1,545 taxpayers have been indicted related to international activities through the work of IRS Criminal Investigation.
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 related to undisclosed foreign financial assets. Taxpayers who made non-willful mistakes or omissions on their tax returns should file amended returns or delinquent returns as soon as possible.
Full details of the options available for U.S. taxpayers with undisclosed foreign financial assets can be found on IRS.gov.
Published September 5, 2018
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