The IRS has announced that it will end the Offshore Voluntary Disclosure Program (OVDP) on September 28, 2018, while its sister program, the Streamlined Filing Compliance Procedures (SFCP) remains intact… for now. (Notice IR-2018-52).
The OVDP is an amnesty program administered by the Internal Revenue Service. Under the terms of the program, taxpayers who willfully failed to report their foreign income and foreign assets to the IRS can submit amended tax returns for the past 8 years and pay a one-time penalty equal to 27.5 percent of the value of their non-compliant foreign assets. In exchange for coming forward voluntarily, the IRS waives the penalties that would otherwise apply and provides taxpayers protection from criminal prosecution. The SFCP and the OVDP are indicative of the IRS’ “carrot and stick” approach to taxpayers with unreported foreign income and foreign assets. The stick is the punitive penalties that the IRS will assess upon discovery of the taxpayer’s noncompliance, which range from $10,000 per asset, per year, all the way to complete forfeiture of the noncompliant foreign assets, and criminal prosecution. The carrot is the OVDP and the SFCP.
In its press release, the IRS announced that the OVDP will be terminated as of September 28, 2018, giving non-compliant taxpayers only a few more months to participate in the program. The OVDP sister program, the SFCP, remains intact, at least for now. The SFCP allows non-willful taxpayers a route to correct past non-compliance by submitting three years of amended tax returns, and paying a one-time 5 percent penalty or no penalty at all, depending on the taxpayer’s residency and citizenship status during the past three years.
The IRS has, on a number occasions, informed taxpayers and practitioners that these amnesty programs would not last forever, and with the termination of the OVDP, the end of the SFCP may soon follow. Now, more than ever, taxpayers with unreported foreign assets and foreign income should consult with a tax professional who has experience with these programs to determine whether participation is warranted or needed.« Back to news