On March 13, 2018, the Internal Revenue Service revealed that it will begin to wind down the 2014 Offshore Voluntary Disclosure Program (OVDP) and close the program on Sept. 28, 2018. By alerting taxpayers now, the IRS intends that any U.S. taxpayers with undisclosed foreign financial assets have time to use the OVDP before the program closes.

Acting IRS Commissioner David Kautter, stated the following:

“Taxpayers have had several years to come into compliance with U.S. tax laws under this program. All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.”

The press release goes on to say:

Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. All told, those taxpayers paid a total of $11.1 billion in back taxes, interest and penalties. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.

The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number steadily declined through the years, falling to only 600 disclosures in 2017.

The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed voluntary programs offered in 2011 and 2009. The programs have enabled U.S. taxpayers to voluntarily resolve past non-compliance related to unreported foreign financial assets and failure to file foreign information returns.

What does this means for tax enforcement going forward?

The IRS fully intends to continue combatting offshore tax avoidance with other tools, including taxpayer education, Whistleblower leads, civil examination and criminal prosecution. Since 2009, IRS Criminal Investigation has indicted 1,545 taxpayers on criminal violations related to international activities, of which 671 taxpayers were indicted on international criminal tax violations.

“The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts with the use of information resources and increased data analytics,” said Don Fort, Chief, IRS Criminal Investigation. “Stopping offshore tax noncompliance remains a top priority of the IRS.”

Do the streamlined procedures still remain a viable option?

The simply answer is, “yes.” The Streamlined Filing Compliance Procedures, designed for taxpayers who might not have been aware of their filing obligations remains in tact for eligible taxpayers. According to data released by the IRS, the streamlined procedures are responsible for 65,000 additional taxpayers coming into compliance. However, just as in the case with OVDP, the Streamlined Filing Compliance Procedures may be discontinued at any point.

Because the circumstances of taxpayers with foreign financial assets spans the gambit, the IRS will continue offering the following options for addressing previous failures to comply with U.S. tax and information return obligations:

• IRS-Criminal Investigation Voluntary Disclosure Program;
• Streamlined Filing Compliance Procedures;
• Delinquent FBAR submission procedures; and
• Delinquent international information return submission procedures.