Adios to the OVDP Disclosure Program

Listen up, Bunky, this relates to your foreign assests
BY: ORLANDO GOTAY

The IRS just announced the end, in six month’s time, of the Offshore Voluntary Disclosure Program.  OVDP was specifically designed for taxpayers with exposure to potential criminal liability or substantial civil penalties, due to willful failure to report foreign financial assets. You did know that as a U.S. person, one is required to tell the IRS about many types of foreign financial assets, right?  Thousands of taxpayers (over 50,000) became compliant through OVDP’s lifespan, netting the IRS billions in “found money”. Well, your loss is their find.

OVDP was designed to provide protection from criminal liability and a way forward to permanently resolving civil tax and penalty obligations.  It will be gone as of Sept. 28, 2018, mostly because the number of participants has dropped extensively as of late. The IRS sees that as evidence of how successful their program is. They think they got all of us.

So, OVDP is gone….what’s left?

In these things, the world is divided between “willful” and “non willful”. “Streamlined” filing procedures are an alternative for those who have less exposure because of their failure to disclose foreign accounts, file foreign bank account reports or other mandatory information returns. Those meeting “streamlined” criteria will be subject to lower (or no) penalties depending on the individual cases.

A very quick overview of that: One must be able to certify one’s “non willful” status with respect to undisclosed assets, and not be under audit or criminal investigation.  Details get thicker as there are different paths for those deemed “resident” in the U.S. versus those who aren’t.

There are other initiatives for folks who were just derelict in not filing FBARs or information returns.  Those procedures, as far as we know, will remain in place, just like streamlined. That’s for now, I would say, as they can be terminated on no notice.

If you think that reducing the number of “come back to the fold” programs means a reduction in enforcement activities, think again.  Stopping offshore tax noncompliance and evasion remain top priorities of the IRS.  The new IRS Commissioner, a tax attorney, has significant experience in representing these types of clients. I’m sure he understands where the agency can improve procedures to detect recalcitrant taxpayers and raise more revenue. If anything, I would expect these activities to continue.

I suspect that some type of OVDP replacement program may appear after September to deal with folks who don’t meet streamlined criteria.  Those among us who are “willful” need a way to rest at night, too.

Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies.  His love of things Mexican has led him to devote part of his practice to federal and state tax matters of U.S. expats in Mexico.  He can be reached at tax@orlandogotay.com or Facebook: GotayTaxLawyer.  This is just a most general outline. It is informational only and not meant as legal advice.