IRS Announces End of Offshore Voluntary Disclosure Program

A couple of months ago, the Internal Revenue Service (IRS) announced that it would end the Offshore Voluntary Disclosure Program (OVDP) on Sept. 28, 2018.

The current OVDP began in 2014. It is a modified version of the OVDP launched in 2012, which followed voluntary programs offered in 2011 and 2009. These programs have enabled U.S. taxpayers to voluntarily resolve past noncompliance relating to unreported foreign financial assets, omitted foreign income, and failure to file certain foreign information returns.

Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of these programs to comply voluntarily. All told, they paid approximately $11.1 billion in back taxes and interest but with significantly reduced monetary penalties.

The number of voluntary disclosures peaked in 2011 when about 18,000 people came forward. The number steadily declined through the years, falling to only 600 disclosures in 2017.

The primary advantage of the OVDP is the guarantee of avoiding criminal prosecution and the opportunity to pay reduced monetary penalties.

Stopping offshore tax noncompliance continues to be the IRS’s top priority. IRS will continue using tools besides voluntary taxpayer disclosure to combat offshore tax avoidance. Those tools include taxpayer education, whistleblower leads, disclosures by foreign financial institutions, data analytics, civil audits, and criminal tax prosecutions. Since 2009, 1,545 taxpayers were indicted for criminal violations related to international activities, of which 671 taxpayers were indicted on international criminal tax violations. None of those taxpayers voluntarily disclosed offshore assets or income under the OVDP.

By alerting taxpayers now, the IRS encourages U.S. taxpayers with undisclosed foreign financial assets or omitted foreign income to consider using the OVDP before the program ends in September.

Nonetheless, a separate IRS program, known as the “Streamlined Filing Compliance Program” will remain in place. That program will not be terminated in September. Under that program, approximately 65,000 taxpayers have been helped to come into compliance with certain offshore filing obligations. The Streamlined Filing Compliance Program procedures will remain in place and available to eligible taxpayers. As with OVDP, IRS has said it may end the Streamlined Filing Compliance Program procedures at some point.

Contact our Tax Practice Group leader Howard L. Richshafer to discuss whether you may be eligible to participate in either the OVDP before it ends in September or the Streamlined Filing Compliance Program.

This entry was posted in Articles.
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    Howard L. Richshafer

    Howard Richshafer joined Wood + Lamping in 2008, and his practice is focused on civil and criminal tax problems, estate planning and probate, tax court trial work, mergers and acquisitions, and general corporate business matters. Howard is also a licensed Ohio CPA. Over the past 40 years, Howard has represented clients experiencing all types of civil and criminal tax problems with IRS. Those problems include IRS audits, IRS criminal investigations, enforced collection of unpaid tax liabilities involving levies, liens, and seizures of assets and income.

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