On March 13, 2018, the Internal Revenue Service (IRS) announced that it will terminate its 2014 Offshore Voluntary Disclosure Program (OVDP), effective September 28, 2018. Since its launch in 2009, over 56,000 taxpayers have taken advantage of the program and its potential shield from criminal tax liability for the willful failure to report and pay tax on foreign accounts. In the public announcement, Acting IRS Commissioner David Kautter commented:
Taxpayers have had several years to come into compliance with U.S. tax laws under this program. All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.
The end of the OVDP comes as no surprise to many and is due, largely in part, to the Foreign Account Tax Compliance Act (FATCA), and its requirement that foreign financial institutions report to the U.S. government foreign assets held by U.S. account holders. Armed with this new data, the IRS no longer has the same incentives to nudge taxpayers into compliance. Rather, the IRS can go directly after taxpayers for violations of international tax laws.
The Chief of IRS Criminal Investigation (IRS-CI) has indicated that the focus on taxpayers and their foreign activities will continue. Since 2009, IRS-CI has been responsible for the indictment of over 1,500 taxpayers, including 671 taxpayers indicted for international tax violations. With the loss of the OVDP, taxpayers can be assured that these numbers will only increase. In the public announcement, the Chief of IRS-CI warned:
The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts with the use of information resources and increased data analytics. Stopping offshore tax noncompliance remains a top priority of the IRS.
For non-willful violations of international tax reporting obligations, taxpayers will find some comfort in IRS communications that it will not yet end the Streamlined Filing Compliance Procedures. However, the IRS has hinted in the public announcement that it may end this also popular program “at some point.”
In light of these new developments, taxpayers with undisclosed foreign accounts are strongly encouraged to discuss their options with their tax advisors. Although the OVDP currently offers an avenue towards tax compliance and the avoidance of criminal tax liability, the IRS has reminded us that this option is not without end.
If you have any questions regarding the OVDP, you may contact Matt Roberts at (214) 749-2409 or by email at firstname.lastname@example.org.