The Internal Revenue Service has announced that it plans to end the Offshore Voluntary Disclosure Program (“OVDP”) which has been in existence in various versions since 2009. The closure would occur on September 28, 2018. Approximately 56,000 taxpayers have used the program since 2009, with $11.1 billion paid in back taxes, interest and penalties.
The program provides for taxpayers who have not disclosed foreign assets and income to come into compliance by voluntarily filing eight years of income tax returns and foreign bank account reports in exchange for less severe penalties while avoiding the risk of criminal prosecution.
Taxpayers who believe they may have unreported foreign accounts are urged to take advantage of the OVDP before it ends. The time to act is now – submissions must be made by September 28, 2018.
Due to FATCA and required bank reporting information, there has been a decline in the number of participants in the OVDP from a high of approximately 18,000 in 2011 to only 600 in 2017. The IRS will continue to monitor offshore activity and has stated that there may be a substitute program.
However, if the IRS follows the pattern seen in previous versions of the program, any future substitute program may contain higher penalties than the one expiring September 28, 2018.
Separate programs like the Streamlined Offshore Filing Procedures, the Delinquent Filing Procedures and the IRS Criminal Investigation Voluntary Disclosure Program will remain in effect. However, the IRS has stated that it may also end the Streamlined Offshore Filing Procedures program at some point. The standard voluntary disclosure program as set forth in the Internal Revenue Manual remains in effect.
The IRS has posted detailed frequently asked questions about the closing of the OVDP on its website, and has indicated that additional information on the Voluntary Disclosure Process after September 28, 2018 is forthcoming.
Please consult your Mazars USA LLP professional for additional information.