By admin of MillarLaw A Professional Corporation On Sunday, April 8, 2018

On March 13, 2018 the IRS announced that the formal Offshore Voluntary Disclosure Program  (“OVDP”would end  September 28, 2018.

• The rationale for ending the the OVDP is as follows:

“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said 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.” (Emphasis added).

According to the IRS, “The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number steadily declined through the years, falling to only 600 disclosures in 2017.”

The end of  the OVDP should not be considered as a relaxation of enforcement efforts, rather it is a signal of new enforcement steps to come.

“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. (Emphasis added).

• How will the IRS find my as yet undisclosed offshore account(s)?

“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 U.S. tax obligations have raised awareness of U.S. tax and information reporting obligations with respect to undisclosed foreign financial assets”

FATCA, coupled with target used of John doe Summonses has lead and will lead to discovery of countless as yet unreported offshore accounts, including those held in Controlled Foreign Corporation, Offshore Trusts and Offshore Foundations.

• What are my risks if I do not come forward?

The risk of continuing non-disclosure are  “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”

Civil penalties for “willful” failure to report offshore financial accounts  ( file an FBAR) are the greater of $100,000 or 50% of the highest account balance per year for up to 6 years ( although internal policy has limited FBAR penalty cases to (2) 50% penalties.  Other civil penalties also apply, such as failure to report Foreign trust, or foreign  gifts, bequests or inheritances if required; failure to timely file a Return of a Controlled Foreign Corporation (“CFC”) and failure to file a Statement of Foreign Financial Assets, are just some of the applicable penalties.

• What are my Options if I want to use the OVDP because my conduct was “Willful”?

You must make a complete filing by September 28, 2018.  To be safe that means not only getting a Pre-Clearance, but getting a Pre-Approval and submitting the required response.  Under normal circumstance the Per-Clearance can take 2-4 weeks, and the Pr-Approval another 2-6 weeks, so time is limited.  Conclusion, you must act soon or risk missing the deadline.

• What are my Options if I believe my conduct is “Non-willful”?

“Because the circumstances of taxpayers with foreign financial assets vary widely, 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:

• IRS-Criminal Investigation Voluntary Disclosure Program;
• Streamlined Filing Compliance Procedures;
• Delinquent FBAR submission procedures; and
• Delinquent international information return submission procedures
• How do I know which I Option I should choose?

This is where you need experienced counsel to analyze the facts or your unique situation and discuss your options.  Your decision must be based upon sound legal and factual understanding in order to limit your penalty, civil and criminal exposure.  We are ready to help.