IRS Ending the Overseas Voluntary Disclosure Program (OVDP)
The IRS has announced that it is ending the Overseas Voluntary Disclosure Program (OVDP) in September of 2018, see: https://www.irs.gov/newsroom/irs-to-end-offshore-voluntary-disclosure-program-taxpayers-with-undisclosed-foreign-assets-urged-to-come-forward-now
The Offshore Voluntary Disclosure Program was implemented in 2009 and designed to bring forth “bad actors” or those willfully involved in tax evasion by offering a compliance program with stiff penalties but no federal prosecution.
The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number has steadily declined through the years, falling to only 600 disclosures in 2017.
ACA was one of the first organizations to highlight that OVDP program was not an appropriate compliance program for honest taxpayers who neglected to file due to simply being unaware of their US tax filing obligation or their obligation to file an FBAR bank report form.
Many of these individuals entered OVDP but were not candidates as they were not willfull in their behavior. Many simply did not understand that tax-free foreign pension accounts, for example, were considered “US bank accounts” for FBAR reporting requirements. Some cases of non-willfull cases that were adjudicated via OVDP were subsequently challenged by the Taxpayer Advocate and many taxpayers were able to overturn their IRS rulings.
ACA advocated to the Congress and the Taxpayer Advocate to open a program specifically geared towards those taxpayers who were not willfully engaged in tax evasion and had simply made errors of omission in their tax filing obligations. ACA recommended its Comprehensive Compliance Program, which the IRS responded to and subsequently released as the Overseas Streamlined Procedure.
The Streamlined Filing Compliance Procedures is for taxpayers who might not have been aware of their filing obligations, and has helped about 65,000 taxpayers come into compliance.
The Streamlined Filing Compliance Procedures will remain in place and available to eligible taxpayers. However, as with OVDP, the IRS has said it may end the Streamlined Filing Compliance Procedures at some point.