I don’t often post verbatim complete IRS pronouncements. This post is an exception, however, because the IRS Newswire Issue reprinted below contains an urgent message for those with unreported offshore income and / or foreign financial accounts who have not yet taken action to come into compliance. After September 28, the safest means of coming into compliance with certainty as to no criminal charges being filed and a predetermined penalty regime will be off the table. The options remaining after September 28 will be less certain and therefore more risky.
Issue Number: IR-2018-52
Inside This Issue
IRS to end offshore voluntary disclosure program; Taxpayers with undisclosed foreign assets urged to come forward now
WASHINGTON – The Internal Revenue Service today announced it will begin to ramp down the 2014 Offshore Voluntary Disclosure Program (OVDP) and close the program on Sept. 28, 2018. By alerting taxpayers now, the IRS intends that any U.S. taxpayers with undisclosed foreign financial assets have time to use the OVDP before the program closes.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter. “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.”
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 planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.
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.
The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed voluntary programs offered in 2011 and 2009. The programs have enabled U.S. taxpayers to voluntarily resolve past non-compliance related to unreported foreign financial assets and failure to file foreign information returns.
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.
“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,” said Don Fort, Chief, IRS Criminal Investigation. “Stopping offshore tax noncompliance remains a top priority of the IRS.”
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.
The implementation of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts of the IRS and the Department of Justice to ensure compliance by those with U.S. tax obligations have raised awareness of U.S. tax and information reporting obligations with respect to undisclosed foreign financial assets. Because the circumstances of taxpayers with foreign financial assets vary widely, the IRS will continue offering the following options for addressing previous failures to comply with U.S. tax and information return obligations with respect to those assets:
- IRS-Criminal Investigation Voluntary Disclosure Program;
- Streamlined Filing Compliance Procedures;
- Delinquent FBAR submission procedures; and
- Delinquent international information return submission procedures.
Full details of the options available for U.S. taxpayers with undisclosed foreign financial assets can be found on IRS.gov.
RSS ADDITIONAL COMMENT
How one with unreported offshore income and / or undisclosed foreign financial accounts should proceed depends upon a person’s particular facts and circumstances. There is no one-size-fits-all solution to offshore noncompliance problems. If you still have unresolved offshore compliance issues call my office for a consultation while all options remain available. After September 28, choices will narrow and become less friendly for many.
Robert S. Steinberg, Esquire*
*Peer Rated AV Preeminent® for Highest Level of Professional Excellence by Martindale-Hubbell since 2002 (Note: AV® and AV Preeminent® are Certification Marks used under license in accordance with the Martindale-Hubbell® certification procedures, standards and policies (www.martindale.com/ratings)).