IRS to End Offshore Voluntary Disclosure Program

The Internal Revenue Service announced last week it will begin to ramp down the 2014 Offshore Voluntary Disclosure Program (OVDP), closing the program on Sept. 28, 2018. By alerting taxpayers now, the IRS is encouraging any U.S. taxpayers with undisclosed foreign financial assets use the OVDP before the program closes. 

Everyone knows the scrutiny given to Cayman Island banks, as well as the hidden accounts revealed by the Panama Papers. But “offshore” in the Internal Revenue Service’s eyes means any location outside United States boundaries. The IRS certainly knows about all these places where U.S. taxpayers stash their cash. And they do all they can to find the money and get the taxes due.

US tax and Report of Foreign Bank Accounts (FBAR) filing requirements for Expats

In addition to employing traditional enforcement actions against offshore accounts, the IRS has used a voluntary program since 2009 to encourage foreign account owners to report their offshore holdings to Uncle Sam at a reduced penalty rate as well as avoid criminal charges.

That option, however, will end in September.

Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. All told, those taxpayers paid a total of $11.1 billion in back taxes, interest, and penalties. 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.

Tax Enforcement

The IRS notes that it will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, Whistleblower leads, civil examination and criminal prosecution. Since 2009, IRS Criminal Investigation has indicted 1,545 taxpayers on criminal violations related to international activities, of which 671 taxpayers were indicted on international criminal tax violations.

Streamlined Procedures and Other Options

A separate program, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations, has helped about 65,000 additional taxpayers come into compliance. The Streamlined Filing Compliance Procedures will remain in place and available to eligible taxpayers. As with OVDP, the IRS has said it may end the Streamlined Filing Compliance Procedures at some point.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you and your family. For more information, contact us today.