The program, which commenced in 2009, is designed to allow taxpayers with unreported offshore assets to voluntarily resolve past tax and reporting non-compliance in exchange for protection from criminal prosecution and a cap on civil penalty exposure.
While OVDP had been extended in 2011, 2012, and most recently in 2014, the IRS had always intended it to be a temporary program and reserved the right to modify or cancel it at any time. The IRS’s announcement of the termination of the program provides taxpayers with outstanding offshore asset delinquencies their last opportunity to take advantage of the OVDP under its current terms.
The IRS was explicit that taxpayers should not view the elimination of OVDP as a signal of the IRS’s decreased enforcement activity in the offshore area. Rather, eradicating offshore non-compliance and evasion will remain a top priority of the agency. The IRS noted that the implementation of the Foreign Account Tax Compliance Act in conjunction with data gathered from other reporting and enforcement initiatives has created a data rich environment for it to continue identifying non-compliance. Moreover, various non-U.S. banks that are currently under investigation continue to provide the Department of Justice and the IRS with data regarding accounts belonging to Americans, and this information is leading to the opening of civil audits and criminal investigations.
Taxpayers who wish to resolve their delinquencies under the terms of OVDP must submit completed intake forms by the September 28 deadline. Given potential delays in the IRS processing of preclearance requests (the step typically undertaken prior to the submission of the OVDP intake forms), as well as the time needed to obtain records relating to offshore assets and prepare the intake forms, taxpayers with unreported offshore assets should seek counsel immediately to explore whether OVDP is a viable option.
Although the IRS is ending OVDP, it will continue to offer other approved disclosure options for taxpayers with offshore non-compliance, including:
- Streamlined Filing Compliance Procedures (“SFCP”);
- Delinquent FBAR Submission Procedures;
- Delinquent International Information Return Submission Procedures;
- The traditional IRS voluntary disclosure practice; and
- “Quiet disclosures.”
The continued availability of SFCP is uncertain as the IRS stated that it may also end this program sometime in the future. The IRS’s traditional voluntary disclosure practice provides similar criminal protections as OVDP. However, taxpayers will be subject to a draconian statutory penalty regime without a general penalty cap. The IRS also reiterated that it will review so-called “quiet disclosures,” which involve filing amended returns reporting previously undisclosed offshore assets without making a voluntary disclosure, and impose statutory criminal and/or civil penalties. For taxpayers who find the OVDP or traditional voluntary disclosure practice penalty regimes to be unpalatable, and who were not willful in their non-compliance, one of the other approved programs may be a better fit.
Navigating the various compliance options and the requirements inherent in each program can be complex; thus, taxpayers are encouraged to seek legal advice as to which program will best fit their circumstances.
If you have any questions about this program or offshore compliance, please contact Leech Tishman’s Taxation Practice Group.
Matthew S. Sutphen is an associate in the Taxation and Corporate Practice Groups and is based in Leech Tishman’s Pittsburgh office. Matthew can be reached at 412.261.1600, or by email at firstname.lastname@example.org. William A. Buck is a partner in the Corporate and Taxation Practice Groups and is also based in the firm’s Pittsburgh office. Bill can be reached at 412.261.1600 or email@example.com.
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