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IRS Closing Popular Program for Disclosing Offshore Accounts IRS Closing Popular Program for Disclosing Offshore Accounts

IRS Closing Popular Program for Disclosing Offshore Accounts

The Department of Treasury recently announced it is set to end its popular Offshore Voluntary Disclosure Program (OVDP). On Sept. 28, 2018, the IRS will end the program and close the door on taxpayers seeking to disclose offshore financial assets without facing stiff civil and criminal penalties. 
The IRS’s announcement gives taxpayers who still hold undisclosed financial accounts or other assets approximately six months to disclosure their offshore holdings to the government. Under the current program, taxpayers who take advantage of the OVDP face reduced civil tax penalties and can avoid criminal prosecution altogether. Since it first introduced the OVDP in 2009, the IRS estimates that more than 56,000 taxpayers have voluntarily disclosed their foreign holdings and have paid a total of $11.1 billion in back taxes, interest and penalties. 
The primary purpose of the OVDP is to allow taxpayers who previously failed to file Foreign Bank and Financial Account Reports (“FBAR”) to come into compliance with their filing and related tax obligations. Many taxpayers, including both individuals and businesses, with ownership interests in or signatory authority over financial accounts (both depository and investment accounts) located in foreign countries are required to disclose such accounts on an annual basis. They are also required to report income generated from such accounts on their US tax returns. Failure to file FBARs can result in both significant civil and criminal penalties. 
Moving forward, the IRS will continue to use other tools at its disposal to encourage full tax compliance, including pursuing whistleblower leads, civil audits and even criminal prosecution. Moreover, the IRS’s focus on taxpayers’ international activities will likely not subside with the closure of the OVDP, particularly since the IRS is getting much more information related to foreign accounts through the recently enacted Foreign Account Tax Compliance Act. Nevertheless, while taxpayers will still have some limited opportunities in the future to voluntary come into compliance with respect to FBAR reporting obligations and paying tax on foreign earned income, the ending of the OVDP eliminates a popular and streamlined opportunity for taxpayers to come into compliance with offshore reporting and payment obligations. While the OVDP program will soon come to an end, there is still time for taxpayers to take advantage of this program and to potentially limit their civil and criminal liabilities. 
Ice Miller has helped numerous clients negotiate voluntary disclosures with the IRS. For more information about ensuring tax compliance or addressing potential tax irregularities, please contact Matt Ehinger in Ice Miller’s Tax Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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