US taxman set to close offshore voluntary disclosure programme

The US Internal Revenue Service (IRS) plans to close the offshore voluntary disclosure program (OVDP) which allows US taxpayers to declare non-compliant offshore assets from 28 September

Any US taxpayers with undisclosed foreign financial assets now have six months until 28 September 2018 to review their offshore assets if they want to use the OVDP before the amnesty period closes.

The programme allows US taxpayers to voluntarily resolve past non-compliance related to unreported foreign financial assets and failure to file foreign information returns.

‘Taxpayers have had several years to come into compliance with US tax laws under this programme,’ said acting IRS commissioner David Kautter.

‘All along, we have been clear that we would close the programme 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 the system to comply voluntarily.

This generated a total of $11.1bn (£7.95bn) in back taxes, interest and penalties. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness byUS 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 to declare undisclosed foreign assets. The number steadily declined, 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 programmes offered in 2011 and 2009.

Tax enforcement

The IRS 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 programme, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations, has seen around 65,000 additional taxpayers come into compliance. This will remain in place for the time being and is available to eligible taxpayers.

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 US tax obligations have raised awareness of US tax and information reporting obligations with respect to undisclosed foreign financial assets. 

As the circumstances of taxpayers with foreign financial assets vary widely, the IRS will continue to offer the following options for addressing previous failures to comply with US 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.

IRS options available for US taxpayers with undisclosed foreign financial assets

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