March 14, 2018
The IRS announced yesterday that it would ramp down its current Offshore Voluntary Disclosure Program (“OVDP”) and entirely close the program on September 28, 2018. The OVDP is a partial amnesty program that generally allows U.S. citizens, green card holders, and U.S. resident taxpayers with undisclosed foreign financial accounts to come forward voluntarily and pay reduced penalties.
According to the IRS statement, “By alerting taxpayers now, the IRS intends that any U.S. taxpayers with undisclosed foreign financial accounts have time to use the OVDP before the program closes.”
The program closure comes at a time when the IRS has begun using advanced data analytics to identify noncompliant taxpayers with foreign accounts. It also comes on the heels of the IRS consolidating its elite special agents who pursue international tax cases into one expert International Tax Enforcement Unit.
Many saw these actions as the early steps in shutting down the OVDP, which has been in place since 2014, and taking a harder-line stance against noncompliant taxpayers.
While the current program allows taxpayers to pay a reduced “offshore penalty” of 27.5% (or 50% if the taxpayer has an account with a foreign bank or facilitator that is already under investigation by the IRS), taxpayers who are caught by the IRS outside a program can face criminal charges and even steeper fines and penalties.
Although the closure affects the full-scale OVDP, the IRS states that taxpayers will be able to continue to avail themselves of some of the more narrowly focused amnesty programs, including the Streamlined Filing Compliance Procedures and procedures for delinquent FBARs and international information returns.
The Wolf Group has assisted hundreds of clients come into U.S. tax compliance and avoid the draconian penalties that the IRS may impose on U.S. persons with undisclosed foreign financial accounts. Please contact us at (703) 502-9500 x154 to set up a consultation with one of our International Tax Directors.