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The Offshore Voluntary Disclosure Program is Closing – Final Submissions Due September 28, 2018

The Offshore Voluntary Disclosure Program (“OVDP”) was specifically designed by the IRS for taxpayers with exposure to civil and potential criminal liability for “willful failure” to report foreign financial assets and income with respect to those assets. Since 2009 this program offered taxpayers with undisclosed foreign accounts and foreign income reporting an opportunity to come forward rather than risk detection by the IRS and possible criminal prosecution. From 2009 to 2014 this IRS initiative was revised and updated various times with a last version in effect since 2014. This 2014 OVDP is the program available today which the IRS has recently announced is closing on September 28, 2018. (See “IRS Announces Third Opportunity for Voluntary Disclosure of Offshore Accounts” and “Important Changes to Offshore Voluntary Disclosure Program.”)

It is important to remember that the complete offshore voluntary disclosures must be received or postmarked by the September 28 date and the submissions may not be partial, incomplete, or placeholder submissions. 

The IRS announced the news in IR-2018-52, dated March 13, 2018, and indicated that the closing of the 2014 OVDP does not signal a change in its priorities towards offshore tax noncompliance. It continues to enforce offshore compliance with tax and FBAR (Reports of Foreign Bank and Financial Accounts) requirements using information received under the Foreign Account Tax Compliance Act (“FATCA”), the network of intergovernmental agreements between the U.S. and partner jurisdictions, automatic third-party account reporting and other sources.  As noted in its release, 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:

Streamlined Filing Compliance Procedures

Since 2012, this program has been available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due with respect to those assets did not result from willful conduct on their part. This program will remain in place and available to eligible taxpayers.  Although the program is still open, the IRS has said it may end it at some point.  

Delinquent FBAR Submission Procedures

This program is designed for those taxpayers that have not been compliant with filing FBAR forms to report foreign bank accounts, are not under civil or criminal investigation by the IRS and have not been contacted by the IRS about the delinquent FBARs.

Delinquent International Information Return Submission Procedures

Same as above, this program was designed for taxpayers that are not candidates for the Offshore Voluntary Disclosure Program or the Streamlined Filing Procedures.  However, they still need to comply with filing delinquent foreign information returns and they have reasonable cause for the failure to file.

Observation: We have seen it happen before from 2009 through 2012 -- the OVDP ending only to start again in “updated form” soon after, only since 2014 the program has been opened indefinitely. Is this the last opportunity for those “willful” cases to be brought forward?  Are we witnessing the “end of an era” or “new beginnings?” That is yet to be determined.

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Cristina Wolff specializes in U.S. and international tax planning and compliance for high net worth individuals and closely-held businesses.

Richard Shapiro, Tax Director and member of EisnerAmper’s Financial Services and Corporate Tax Groups, has more than 40 years’ experience in federal income taxation, including the taxation of financial instruments and transactions, both domestic and international, corporate taxation and mergers and acquisitions.