In a release dated September 4, 2018, the IRS reminded taxpayers that the program that allowed for reduced civil liabilities for offshore reporting violations is coming to an end on September 28. The program, generally known as the Offshore Voluntary Disclosure Program, or "OVDP," started in 2008 in the wake of revelations that certain major European banks assisted U.S. persons in hiding substantial assets and income through offshore accounts. The IRS subsequently modified and fine-tuned the program over the next several years. By all accounts the program was a success, bringing thousands of taxpayers into compliance and collecting back taxes and penalties. However, because applications for the OVDP have sharply fallen and because the IRS believes taxpayers are now generally educated as to their reporting obligations, the IRS has chosen to discontinue the OVDP.
Notwithstanding the termination of the OVDP, the IRS's longstanding general voluntary disclosure program of course remains in place. The IRS also stated in the release that these voluntary disclosure procedures will be updated soon, likely to incorporate the lessons learned through the OVDP disclosures and perhaps to account for some unique features relating to offshore reporting violations. Taxpayers who are not in danger of criminal liability for reporting violations may request a substantially reduced civil penalty or no penalty through another program to disclose non-willful reporting mistakes, referred to as the Streamlined Filing Compliance Procedures Program (the "Streamlined Program"). The IRS may end this program as well at some point in the future.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved