By Staff | March 23th, 2018 | Tags: California Law, Corporate Law, IRS News, IRS Partnership Audit Rules | 0 Comments.
Teeple Hall, LLP. – U.S. IRS Offshore Voluntary Disclosure Program Closing September 2018
On March 26, 2009, the IRS announced the Offshore Voluntary Disclosure Program (“OVDP”) which was extended and modified on
February 8, 2011 (as the 2011 Offshore Voluntary Disclosure Initiative or “OVDI”) and January 9, 2012 (as the “2012 OVDP”). The initial
program was a result of the IRS’s perceived non-compliance with U.S. tax laws governing the disclosure and reporting by U.S. persons of
foreign assets. While the programs were available on a worldwide basis notwithstanding the location of a taxpayers’ accounts, a high
percentage of cases involved disclosure of accounts held in Swiss private banks.
On March 13, 2018, the IRS announced that the OVDP will formally close on September 28, 2018. While the OVDP is ending, other
approved disclosure options will remain, including: Streamlined Filing Compliance Procedures; delinquent international information
return submission procedures; delinquent FBAR submission procedures; and, the traditional IRS Voluntary Disclosure Practice.
These traditional and continuing disclosure procedures, however, do not afford the same protections against penalties or criminal
prosecution as the OVDP.
While many U.S. taxpayers have brought their foreign assets into compliance, there are most certainly taxpayers who remain noncompliant
and face potentially significant civil and/or criminal penalties. Now is the time to resolve these outstanding issues within the
framework of a formal program. While the IRS has maintained informal voluntary disclosure procedures for many decades and will most
certainly continue to do so, the favorable penalties and general pass on criminal charges within the OVDP, remain attractive options.
A cornerstone of the latest program iteration was the introduction of the foreign and domestic streamlined procedures for taxpayers who
could state, under penalty of perjury, that they were not willful in failing to report their foreign assets and associated income. With FATCA,
CRS and dramatically enhanced compliance programs instituted by financial institutions, it seems harder (if even possible) for a taxpayer
to take a position that they were unaware of U.S. filing obligations which, in turn, may present challenges when taxpayers are ultimately
forced to disclose. Therefore, while the Streamlined Filing Compliance Procedures and other traditional IRS disclosure procedures remain
in place as of now, the availability for taxpayers will be significantly limited.
In order to ensure ongoing compliance with filing requirements or to identify deficiencies in their position, taxpayers should consult with
experienced tax/legal advisors to:
1. Review their foreign activities and assets
2. Review and understand their tax and/or asset disclosure obligations that citizenship (single, dual or otherwise), tax residence and
domicile may trigger – NOTE: in our experience, many taxpayers are unaware of their U.S. citizenship or their continued U.S. tax
3. Review their relationship to foreign (non-U.S.) trusts/foundations as settlor, beneficiary, trustee or other fiduciary position — NOTE:
a trust governed under the law of a U.S. state could be a “foreign” trust for U.S. tax and reporting purposes!
4. Review their ownership (direct or indirect) with foreign (non-U.S.) corporations, partnership and other entities — NOTE: the 2017
Tax Reform Act substantially changed the attribution rules for ownership tests in foreign entities!
For further information, please contact Todd Douglas Hall, Esq., Partner, or B. Roland Freasier, Jr., Esq., at Teeple Hall, LLP