Offshore Voluntary Disclosure Program (OVDP) is Over
The Internal Revenue Service (IRS) announced on March 13, 2018 (IR-2018-52) that it will be closing the 2014 Offshore Voluntary Disclosure Program (OVDP) on September 28, 2018. This is an important announcement for U.S. taxpayers who may be delinquent with their U.S. tax and reporting obligations and are eligible to participate in the OVDP. To the IRS credit, the Service gave taxpayers a reasonable advance notice that gives potential OVDP candidates some time to take advantage of the OVDP, while it is still available.
According to the IRS announcement, since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used the 2009, 2011, 2012 or 2014 programs to come into compliance with their U.S. tax obligations. The IRS has noted that it has always intended on closing the program and emphasized that the government had given eligible taxpayers ample opportunity to come forward voluntarily. It is true that the program could have been closed any time, but previously the IRS did not indicate that it had any intention on closing it. The advancement in third-party reporting, unparalleled global transparency, growing information exchange between the IRS and tax authorities of other jurisdictions, as well as the increased awareness by U.S. taxpayers of their offshore tax and reporting obligations has led the IRS to the decision to close the program. For example, the Canada Revenue Agency (CRA) has already transmitted to the IRS information on over half a million U.S. persons who hold bank accounts with Canadian financial institutions under the Model I Intergovernmental Agreement (IGA).
The IRS has issued Frequently Asked Questions and Answers section on its website, which can be found at https://www.irs.gov/individuals/international-taxpayers/closing-the-2014-offshore-voluntary-disclosure-program-frequently-asked-questions-and-answers. This FAQ section offers insight into the IRS rationale for closing the program.
In its notice, the IRS stated that it will use alternative tools to combat offshore tax avoidance, including continued education of taxpayers, Whistleblower leads (those “good Samaritans”), civil examination, and criminal prosecution. According to the IRS announcement, since the program’s inception in 2009, the IRS Criminal Investigations unit has indicted 1,545 taxpayers on criminal violations related to international activities, of which 671 taxpayers were indicted on international criminal tax violations.