An Overview of the 2014 OVDP and Enhanced Streamlined Filing Compliance Procedures

Author(s):  Alex­ey Man­a­suev Date:  August, 2014On June 18, 2014, the IRS released sig­nif­i­cant changes to its off­shore vol­un­tary dis­clo­sure pro­gram and enhance­ments to the stream­lined fil­ing com­pli­ance pro­ce­dures (SFCP).1 Along with the new rules, the IRS offered tran­si­tion­al treat­ment to those tax­pay­ers who are par­tic­i­pat­ing in the OVDP and meet cer­tain requirements.2 Unfor­tu­nate­ly, the IRS allowed only lim­it­ed time for those tax­pay­ers to qual­i­fy for the tran­si­tion­al treat­ment. The tran­si­tion­al treat­ment is extend­ed only to those tax­pay­ers who were ‘‘par­tic­i­pat­ing’’ in the OVDP (man­aged to file their OVDP sub­mis­sion and did not enter into a clos­ing agree­ment with the IRS) on or before June 30, 2014. The ben­e­fit of the tran­si­tion­al treat­ment is in apply­ing the reduced and more favor­able penal­ty struc­ture of the enhanced SFCP for those tax­pay­ers who, even though par­tic­i­pat­ing in the OVDP, are qual­i­fy­ing under the terms of the enhanced SFCP. Anoth­er ben­e­fit of qual­i­fy­ing for the tran­si­tion­al treat­ment is in the tax­pay­ers’ abil­i­ty to elect the pro­cess­ing of their OVDP cas­es under the old rules, in exis­tence before the new rules became effec­tive on July 1, 2014 (see the dis­cus­sion of sig­nif­i­cant OVDP changes below). Tax­pay­ers who may face increased penal­ties under the new OVDP rules may still ben­e­fit from the old 2012 OVDP penal­ty struc­ture if they filed their pre­clear­ance OVDP sub­mis­sions with the IRS off­shore vol­un­tary dis­clo­sure coor­di­na­tor on or before August 4, 2014. For the first time since the IRS released its OVDP ini­tia­tive in 2009, the IRS clar­i­fied options avail­able to U.S. tax­pay­ers with undis­closed for­eign finan­cial assets and accounts to come into com­pli­ance with their U.S.tax oblig­a­tions and for­eign bank account report fil­ing oblig­a­tions. These options are as fol­lows .…

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