Suppose you have been purposefully hiding foreign financial assets from the IRS. In that case, you are running out of time to use one of the IRS’s disclosure programs, which will keep you free from criminal penalties and substantial civil penalties. The IRS recently announced it would begin phasing down its Offshore Voluntary Disclosure Program (OVDP) and close the program on September 28, 2018.
The OVDP is designed explicitly for taxpayers exposed to potential criminal liability and substantial civil penalties due to a willful failure to report foreign financial assets and pay all taxes due for those assets. According to the IRS, since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of its programs to comply voluntarily. Those taxpayers paid $11.1 billion in back taxes, interest, and penalties but avoided criminal penalties and even more substantial penalties. By alerting taxpayers of the program’s closure several months in advance, the IRS gives taxpayers with intentionally undisclosed foreign financial assets time to take advantage of the OVDP before it closes.
A separate but related program, the Streamlined Filing Compliance Procedures, will continue. This program is for taxpayers who might not have been aware of their filing obligations (i.e., the failure to file was not willful) and has helped about 65,000 taxpayers come into compliance. However, in addition to ending the OVDP, the IRS has said it may end the Streamlined Filing Compliance Procedures. Because the circumstances of taxpayers with foreign financial assets vary widely, the IRS will continue offering other options for addressing previous failures to comply with U.S. tax and information return obligations concerning those assets.
If you have foreign financial assets such as accounts held at foreign banks, foreign stocks, or foreign business interests, and are unsure whether you have reported these assets or should report these assets, please do not hesitate to contact your attorney at Carlile Patchen and Murphy LLP or any member of either the Family Wealth & Estate Planning Group or Taxation Group.