On 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 ….