The Internal Revenue Service will begin to ramp down the 2014 Offshore Voluntary Disclosure Program (OVDP) and close the program on Sept. 28, 2018.
The tax authority advises U.S. taxpayers with undisclosed foreign financial assets to make use of the OVDP before the program closes.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter. “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.”
Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. In total, 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 IRS said.
In particular the implementation of the Foreign Account Tax Compliance Act had raised awareness of U.S. tax and information reporting obligations with respect to undisclosed foreign financial assets.
The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. However, that number has since steadily declined and dropped 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.
The IRS noted that it will continue to use tools other than voluntary disclosure to combat offshore tax avoidance, such as taxpayer education, whistleblower leads, civil examination and criminal prosecution.
Since 2009, the Criminal Investigation arm of the IRS has indicted 1,545 taxpayers on criminal violations related to international activities. Of these, 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 of IRS Criminal Investigation. “Stopping offshore tax noncompliance remains a top priority of the IRS.”
A separate program, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations, has helped about 65,000 additional taxpayers come into compliance.
The Streamlined Filing Compliance Procedures will remain in place and available to eligible taxpayers.