The IRS has announced it will begin to shut down the 2014 Offshore Voluntary Disclosure Program (OVDP). The program will close on September 28, 2018. Therefore, U.S. taxpayers with undisclosed foreign financial assets have a limited amount of time to use the OVDP before the program ends.
Background
More than 56,000 taxpayers have used one of the IRS disclosure programs since the ODDP initially launched in 2009. Those taxpayers have paid a total of $11.1 billion in back taxes, interest and penalties. The number OVDP disclosures peaked in 2011, when about 18,000 people applied. The number has steadily fallen to only 600 disclosures in 2017. The programs have enabled U.S. taxpayers to voluntarily resolve past noncompliance related to unreported foreign financial assets and failure to file foreign information returns.
"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."
Tax Enforcement
The IRS's plan to end the current OVDP reflects advances in third-party reporting and U.S. taxpayers' increased awareness of their tax reporting obligations. However, the IRS will continue to use other tools to combat offshore tax avoidance. These tools include:
- Taxpayer education
- Whistleblower leads
- Civil examinations, and
- Criminal prosecution.
Other Options
Although the OVDP is ending, some other IRS compliance programs will remain for now. The Streamlined Filing Compliance Procedures will remain available to eligible taxpayers. These procedures are for taxpayers who might not be aware of their filing obligations. In addition, the IRS will also continue the following programs:
- IRS-Criminal Investigation Voluntary Disclosure Program;
- Delinquent FBAR submission procedures; and
- Delinquent international information return submission procedures.
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."
You can read the actual IRS announcement here: IR-2018-52, March 13, 2018.