Wednesday, March 14, 2018

IRS OVDP Ending: Last Chance for Some Taxpayers with Unreported Foreign Financial Assets


By: Steven J. Mopsick and Allison Ornelaz

As many in the tax and accounting field have predicted for some time, the IRS will be ending the 2014 Offshore Voluntary Disclosure Program (OVDP) officially on September 28, 2018.  See IR 2018-52.

The OVDP has been around since 2009, partly in response to the implementation of the Foreign Account Tax Compliance Act (FATCA), as well as stepped up IRS enforcement generally, in the foreign area. Over the past nine years, the program has produced a total of $11.1 billion from over 56,000 taxpayers. The program at its peak saw 18,000 taxpayers come forward in 2011 and has been on a decline ever since. A mere 600 taxpayers came forward through the program in 2017.

What is the IRS’ rationale for ending the program?  One could assume the IRS believes that taxpayers have had plenty of time to heed the requirement to disclose their unreported offshore financial assets and come into compliance. Arguably, the rationale for ending the program is, those who have either had their head in the sand or are willfully avoiding their tax reporting obligations should not be granted any type of “deal” the IRS may grant for voluntarily coming forward.

Fortunately taxpayers who fit the criteria for the Streamlined Filing Compliance Procedures will still be able to use those protocols. However, the IRS reminds us that just as it has done with OVDP, the Streamlined Procedures can end at any time, urging taxpayers with undisclosed foreign financial assets to come forward now before risking draconian penalties and even potential criminal action.

Along with the Streamlined Filing Compliance Procedures remaining as an available option, the IRS also mentions the Criminal Investigation Voluntary Disclosure Program, Delinquent FBAR submission procedures, and the delinquent international information return submission procedures which will also remain in effect.