Taxpayers Should Act Before October to Significantly Reduce Potential Penalties
The IRS will discontinue its Offshore Voluntary Disclosure Program (OVDP) on Sept. 28, 2018. The program was originally intended as a temporary amnesty program for taxpayers who willfully failed to report foreign financial assets. By providing taxpayers notice now, the IRS hopes to provide any U.S. taxpayer with undisclosed foreign financial assets the time to take advantage of the program.
The OVDP, which has provided the opportunity to pay taxes owed in exchange for protection from criminal liability, has allowed such taxpayers to resolve their civil tax liabilities at reduced rates. According to 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.”
According to the IRS, more than 56,000 taxpayers have taken advantage of the OVDP for a total of $11.1 billion in back taxes, interest and penalties to the IRS. However, the number of taxpayer disclosures has steadily declined from 18,000 people at the peak of the program in 2011 to only 600 disclosures last year.
The IRS cites a growing awareness of offshore tax and reporting obligations, and a significant decline in the number of taxpayers participating in the OVDP as reasons for terminating the program. The IRS will continue to enforce offshore compliance with tax and FBAR requirements using information received under the Foreign Account Tax Compliance Act (FATCA), as well as through other means.
Individuals should take advantage of the OVDP to report foreign bank accounts that haven’t been reported previously. Offshore voluntary disclosures must be completed in full and received or postmarked by Sept. 28, 2018. MarksNelson can assist affected taxpayers with preparing the required compliance. For more information contact Sara Stubler in our International Tax Department at 816-743-7700.