IRS Announces Closure of Offshore Voluntary Disclosure Program
On March 13th, 2018, the Internal Revenue Service (“IRS”) issued the news release IR 2018-52. The IRS announced that it was closing its offshore voluntary disclosure program (“OVDP”). The closure will occur on September 28, 2018. The first OVDP began back in 2009 and has been closed and reopened throughout the years.
The OVDP allows for US taxpayers, with previously unreported foreign assets that were unknown to the IRS, to come forward and make a voluntary disclosure of these assets to the IRS. Under the current OVDP, participants in the OVDP are eligible to avoid criminal prosecution and pay reduced penalties. Under the current version of the OVDP, the taxpayer is liable for the tax on the unreported foreign assets and accounts, interest, and applicable penalties on whatever is owed. There is also a 27.5 percent penalty on your highest offshore account balance, and in some cases, 50 percent penalty on the highest offshore balance if your offshore financial institution is a particular type.
The IRS also stated in the news release that the IRS will continue to use all of the IRS’s tools to combat offshore tax avoidance. Although the OVDP is ending, the IRS continues to focus on foreign asset tax compliance. In addition, there are still other programs available to taxpayers to address previous failures in complying with US tax and information return obligations. These include:
- IRS-Criminal Investigation Voluntary Disclosure Program,
- Streamlined Filing Compliance Procedures,
- Delinquent FBAR submission procedures, and
- Delinquent International Information return submission procedures.
In the past, OVDP has been reopened, but the IRS is not obligated to re-institute the program. There is no guarantee that there will be another OVDP. Taxpayers with unreported foreign assets should take advantage of the OVDP and apply for its protections before it closes enrollment on September 28, 2018.