Offshore Voluntary Disclosure Program

Streamlined Domestic Disclosure: Main Advantages | SDOP Attorney

At this point, Streamlined Domestic Offshore Procedures (“Streamlined Domestic Disclosure”) is undoubtedly the most popular offshore voluntary disclosure option. Let’s explore three main reasons for this preference of Streamlined Domestic Disclosure among US taxpayers.

Streamlined Domestic Disclosure: Background Information and General Requirements

The IRS created the Streamlined Domestic Disclosure as an offshore voluntary disclosure option on June 18, 2014. The IRS specifically the designed Streamlined Domestic Disclosure to address the critique of many practitioners and taxpayers that the 2012 OVDP did not adequately deal with US taxpayers who non-willfully violated their US tax obligations (for example, in cases where the taxpayers simply did not know about the existence of FBAR or Form 8938).

Any taxpayer can participate in the Streamlined Domestic Disclosure as long as he satisfies all three parts of the eligibility criteria: US tax residency, absence of IRS examination or investigation and non-willfulness.

If a taxpayer satisfies the eligibility criteria, he then must comply with all of the required submissions. The key requirement here is the certification under the penalty of perjury that the taxpayer’s prior tax noncompliance was non-willful. This requirement is the heart of the Streamlined Domestic Disclosure and must be approached with special care.

The other requirements include filing of amended tax returns for the past three years (with all of the necessary information returns), filing FBARs for the past six years, payment of tax due with interest and payment of Miscellaneous Offshore Penalty. Other requirements may also apply depending on the specific situation of a taxpayer.

Streamlined Domestic Disclosure Offers a Number of Advantages to Noncompliant US Taxpayers

While the list of the requirements above may seem like a lot of work, in reality, Streamlined Domestic Disclosure definitely offers a number of advantages compared to other offshore voluntary disclosure options. I will discuss in this article only the main three advantages.

Keep in mind that the Streamlined Domestic Disclosure may not always be advantages to taxpayers. There are plenty of situations where other offshore voluntary disclosure options may be superior to Streamlined Domestic Disclosure.

I also wish to emphasize that the analysis of advantages or disadvantages of a particular voluntary disclosure option is highly fact-specific. I strongly recommend that you contact Sherayzen Law Office for a detailed analysis of your voluntary disclosure options before you even attempt to proceed with your offshore voluntary disclosure.

Advantages of Streamlined Domestic Disclosure: Flexible Risk Management

One of the greatest advantages (though, the one rarely discussed on the Internet) of the Streamlined Domestic Disclosure is the opportunity this option offers to manage the voluntary disclosure risks. We can be even more precise – to manage the risk-reward ratio.

There is no doubt that OVDP (the 2014 IRS Offshore Voluntary Disclosure Program) may be the safest option available in the great majority of cases, but its “rewards” in terms of penalty rate, calculation of Penalty Base and other factors are generally (though, not always) inferior to those of the Streamlined Domestic Disclosure. Noisy Disclosures stand at the opposite end of the spectrum compared to the OVDP.

Streamlined Domestic Disclosure, however, occupies the middle ground. You only have to establish non-willfulness, not reasonable cause. This is a much lower standard. Moreover, this standard is applied to all international information returns, not just FBARs. At the same time, the penalty rate (see below) is generally far more advantageous than that of the OVDP.

Advantages of Streamlined Domestic Disclosure: Relatively Low Penalty Rate

One of the most cited advantages of the Streamlined Domestic Disclosure is the low penalty rate of 5%. Compared to the OVDP penalty rate of 27.5% or FBAR non-willful penalties outside of a voluntary disclosure program, this can be a very advantageous option. This is not always the case, but it is true in most non-willful cases.

Advantages of Streamlined Domestic Disclosure: Shortened Voluntary Disclosure Period

Another great advantage of Streamlined Domestic Disclosure is the smaller number of years covered by the voluntary disclosure period. Unlike the OVDP voluntary disclosure period (which covers eight years of FBARs and tax returns), this voluntary disclosure option only encompasses the years which are covered by a regular statute of limitations.

In other words, it only includes the past six years of FBARs (occasionally seven) and past three years of tax returns. Obviously, this is a lot more convenient than OVDP.

A voluntary disclosure that involves an expatriation will require an increased number of amended tax returns.

Contact Sherayzen Law Office for Professional Help with Streamlined Domestic Disclosure

Despite having a much simpler procedure, Streamlined Domestic Disclosure may still be quite complex and require professional attention. There are a number of pitfalls that may seriously undermine the advantages of a Streamlined Domestic Disclosure. Sometime, unrepresented taxpayers may also make mistakes that will result in a disastrous result during a subsequent IRS audit.

This is why you need the professional help from Sherayzen Law Office. Our experienced legal team has helped hundreds of US taxpayers with their Streamlined Domestic Disclosures, and We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

2018 Post-OVDP Options | Foreign Accounts IRS Lawyer & Attorney

In a previous article, I discussed the recent IRS announcement with respect to the closure of the IRS Offshore Voluntary Disclosure Program (“OVDP”) on September 28, 2018. Today, I would like to predict the range of the 2018 post-OVDP options for offshore voluntary disclosures starting October of 2018.

2018 Post-OVDP Options: Streamlined Compliance Procedures

As of October 1, 2018, the taxpayers will still be able to utilize the Streamlined Compliance Procedures to complete their voluntary disclosures with respect to their foreign income and foreign assets. This option will be available only to taxpayers who will be able to certify that their prior noncompliance with US international tax laws was non-willful.

There are two variations within the Streamlined Compliance Procedures that are available to taxpayers depending on their residency: Streamlined Domestic Offshore Procedures (“SDOP”) and Streamlined Foreign Offshore Procedures (“SFOP”). I expect both options to be available on October 1, 2018 and even into 2019.

I should emphasize, however, that the existence of Streamlined Compliance Procedures is by no means assured in the future. As I have stated in the article that predicted the demise of the OVDP, there may be a point in the future (and it can be a near future – 2020 or 2021) when even these procedures will be affected. It is more likely that SFOP will survive for a longer period of time than SDOP.

The other issue with Streamlined Compliance Procedures is that some of the terms of this type of voluntary disclosures may change over time even if SDOP and SFOP will remain in place.

Nevertheless, the Streamlined Compliance Procedures is a very popular option.  In fact, according to the IRS, about 65,000 taxpayers have used it since its creation in 2014). This is a very high dis-incentive for the IRS to end this option.

2018 Post-OVDP Options: Delinquent FBAR Submission Procedures

I fully expect the Delinquent FBAR Submission Procedures to be available as of October 1, 2018. In one form or another, this option has always existed within the IRS. First, it was an informal understanding of the IRS that, in the absence of income tax noncompliance and other aggravating factors, there would be no FBAR penalties. Then, this option was “codified” as FAQ #17 within the OVDP programs.

In 2014, the Delinquent FBAR Submission Procedures became an independent option. Of course, now, this is a somewhat harsher option.

2018 Post-OVDP Options: Delinquent International Information Return Submission Procedures

I expect that this option will continue to exist as of October 1, 2018. Similarly to FBAR, it used to be a part of various OVDPs as FAQ #18. Now, Delinquent International Information Return Submission Procedures is a separate option which requires a reasonable cause explanation.

2018 Post-OVDP Options: IRS-Criminal Investigation Voluntary Disclosure Program (CI-VDP)

This option has existed for a very long time; it just faded into obscurity during the existence of OVDP. Now, it will surge back to life as it becomes almost the default option for a voluntary disclosure for US taxpayers who willfully violated their US tax obligations. In fact, I now expect CI-VDP to become a very valuable voluntary disclosure option (similar to what it used to be prior to 2009 OVDP).

2018 Post-OVDP Options: Reasonable Cause “Noisy” Disclosures

Since Reasonable Cause Disclosures (a/k/a “Noisy Disclosures”) are based on statutory law and not on any IRS programs, I fully expect this voluntary disclosure option to be available on October 1, 2018.

Contact Sherayzen Law Office for Professional Help With the Voluntary Disclosure of Your Foreign Assets and Foreign Income

If you have been unable to comply with US international tax laws concerning the reporting of foreign assets (including foreign accounts) and foreign income, you should contact Sherayzen Law Office for professional help.

Sherayzen Law Office is a leading international tax law firm in the area of offshore voluntary disclosures. Our highly specialized legal team, led by an international tax attorney Mr. Eugene Sherayzen, has helped hundreds of US taxpayers with assets in close to 70 countries to bring their tax affairs into full compliance with US tax laws.

We can Help You! Contact Us Today to Schedule Your Confidential Consultation!

IRS OVDP to End on September 28, 2018 | US OVDP Tax Law Firm

On March 13, 2018, the IRS announced that it will be closing its flagship 2014 Offshore Voluntary Disclosure (“OVDP”) program on September 28, 2018. The closure of the IRS OVDP was already predicted by Sherayzen Law Office last year. Let’s analyze further this important development.

Historical Overview of the IRS OVDP

I already provided a profound historical overview of the IRS OVDP in a previous article. Here, I would like to state a brief summary of this history.

The 2009 Offshore Voluntary Disclosure Program (“2009 OVDP”) is considered to be the first modern offshore voluntary disclosure program created by the IRS. There were voluntary disclosure initiatives in the earlier years (most notably 2004), but they lacked the sophistication, publicity and enforcement that characterized the post-UBS case IRS OVDPs.

The 2009 OVDP ended in October of that year, but its favorable results laid the foundation for the enormously successful 2011 Offshore Voluntary Disclosure Initiative (“2011 OVDI”). In fact, the 2011 OVDI turned out be such a hit that, after it ended, the IRS almost immediately instituted the “permanent” 2012 OVDP with many terms fairly similar to 2011 OVDI.

In 2014, the 2012 OVDP underwent a profound change with the creation of the Streamlined Domestic Offshore Procedures (“SDOP”) and the Streamlined Foreign Offshore Procedures (“SFOP”) as well as the split off of the old FAQ 17 and FAQ 18 into new Delinquent FBAR Submission Procedures and Delinquent International Information Returns Submission Procedures respectively. The changes to 2012 OVDP were so dramatic that the IRS and the practitioners treated the remaining part of the IRS OVDP as the 2014 OVDP.

Popularity of the IRS OVDP Changed Over Time

Since the introduction of the 2009 OVDP, more than 56,000 taxpayers participated in some version of the IRS OVDPs. Altogether, the IRS stated that “those taxpayers paid a total of $11.1 billion in back taxes, interest and penalties”.

The popularity of the IRS OVDP, however, changed over time. It really peaked with the 2011 OVDI – about 18,000 taxpayers participated in this program. The numbers have declined ever since; the decline greatly accelerated with the 2014 introduction of SDOP and SFOP. In fact, the IRS stated that only 600 disclosures were made through the IRS OVDP in the entire year 2017.

IRS OVDP: Its Importance Today and Who Will Be Affected Most by Its Closure

Today, the IRS OVDP remains the main voluntary disclosure option for US taxpayers who willfully failed to comply with their US international tax obligations. In fact, this is the best option available to these willful taxpayers. The IRS-Criminal Investigation Voluntary Disclosure Program (CI-VDP) does not offer any of the assurances on the penalty limitations that the IRS OVDP offers today.

It is important to point out, however, that the IRS OVDP can be a desirable voluntary disclosure option not only to willful taxpayers, but also to taxpayers who were non-willful in their inability to comply with the complex US international tax laws.

There are at least two categories of these non-willful taxpayers who will be affected by the impending closure of the IRS OVDP. First, the taxpayers who were non-willful, but lack sufficient proof to establish their non-willfulness in the SDOP or SFOP. In such cases, IRS OVDP offered a prudent, even if more expensive way to deal with prior tax noncompliance.

Second, due to the fact that the IRS OVDP does not impose penalties on unreported foreign assets that were not related to income tax noncompliance, some non-willful taxpayers may find it more economically beneficial to go through the IRS OVDP rather than SDOP.

Finally, it should be remembered that the IRS OVDP is the only offshore voluntary disclosure option (besides CI-VDP) that offers a Closing Agreement – i.e. a nearly guaranteed assurance that there will not be an IRS audit of prior years after the voluntary disclosure is completed, absent fraud and/or material mis-statements of fact.

Why Did IRS Decide to End IRS OVDP?

The reasons that IRS listed today for the closure of the IRS OVDP are practically the same as what I stated in my article last year, when I predicted the likely closure of the IRS OVDP.

First, the IRS stated that the “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.” In other words, as I have previously wrote, the existing voluntary disclosure options are rapidly losing value as a source of new information regarding offshore noncompliance with US taxes. Third-party reporting has overtaken the OVDP in this respect due to the huge and continuously expanding network (especially the FATCA network) of automatic information exchange between the IRS and foreign financial institutions.

Second, as I warned in November of 2017, there has been a systemic change to a different model of tax administration. The IRS noted that “it will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, Whistleblower leads, civil examination and criminal prosecution.”

This means that the IRS is shifting away from processing broad voluntary disclosure programs while it is embracing the model of focused enforcement. This is precisely why the IRS created the issued-based LB&I Compliance Campaigns. Hence, we now entered into a phase where various enforcement channels will dominate the IRS efforts to implement US international tax laws.

Do US Taxpayers Still Have Time to do a Voluntary Disclosure Through IRS OVDP?

Yes, the taxpayers who wish to utilize the IRS OVDP option will still be able to do it through September 28, 2018.

Contact Sherayzen Law Office if You Wish to Explore Your Voluntary Disclosure Options, Including IRS OVDP

If you a US taxpayer who has undisclosed foreign assets and foreign income, you should contact Sherayzen Law Office for professional help. Our highly experienced international tax law firm has helped hundreds of US taxpayers to successfully bring their US tax affairs into full compliance with US tax laws.

You will be working directly with an international tax lawyer and owner of Sherayzen Law Office, Mr. Eugene Sherayzen. He will thoroughly analyze the facts of your case, determine your US tax compliance requirements with respect to unreported foreign assets and foreign income, estimate your penalty exposure, and determine the available voluntary disclosure options.

Once a voluntary disclosure option is chosen, the highly professional team of Sherayzen Law Office will work with you and prepare all of the necessary tax forms and legal documents. We will guide you throughout the entire process, including IRS representation in case of an IRS challenge of your voluntary disclosure or an IRS audit.

We have helped taxpayers with assets from close to 70 countries around the world and We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

IRS Requests Comments on OVDP Information Collection | OVDP Lawyer

On February 28, 2018, the IRS issued a request for comments from the general public with respect to the its OVDP Information Collection practices. Let’s explore this new development in more detail.

OVDP Information Collection: Background Information on the OVDP

The IRS Offshore Voluntary Disclosure Program (“OVDP”) remains today the primary voluntary disclosure route for taxpayers who violated their US international tax requirements willfully. It is also a valid option for taxpayers who wish to avoid the uncertainty associated with the Streamlined Compliance Procedures. This uncertainty often arises with respect to being able to establish non-willfulness and the potential follow-up audit. Finally, given the differences between the OVDP penalty calculation rules and those of the Streamlined Domestic Offshore Procedures (“SDOP”), some taxpayers may find it beneficial to go through the OVDP rather than SDOP.

The idea behind the OVDP is to allow US taxpayers to voluntarily disclose their prior noncompliance with US international tax requirements, including FBAR, in return for a fixed, lower penalty. One of the great benefits of the OVDP is that it generally eliminates the risk of a criminal prosecution.

OVDP Information Collection: Forms For Which Comments are Requested

The IRS requests comments for all Forms 14452, 14453, 14454, 14457, 14467, 14653, 14654, 14708 and 15023. In other words, while this request is formally made under the OVDP, it also covers the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Moreover, by including the brand-new Form 15023 (which was just created a few months ago), this request for comments (which supposed should cover only the OVDP Information Collection) also extends to the new IRS Decline and Withdrawal Campaign.

OVDP Information Collection: Requested Comments

The IRS requests comments on five matters related to the OVDP Information Collection, SDOP, SFOP and Form 15023:

“(a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.”

OVDP Information Collection: Deadline for Comments

The IRS requests that all written comments be received on or before April 30, 2018.

Contact Sherayzen Law Office for Professional Help With OVDP and Other Offshore Voluntary Disclosure Options

If you have undisclosed foreign accounts and foreign income, you should contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers to resolve their prior US international tax noncompliance, and we can help You!

Contact Us Today to Schedule Your Confidential Consultation!

Abandoned OVDP Preclearance Requests Are Targeted by IRS

Since January 31, 2017, all of the denied and abandoned OVDP Preclearance requests have become the target of a special IRS compliance campaign. Let’s analyze in more detail this important development and attempt to predict what may be its main consequences for noncompliant or formerly noncompliant US taxpayers.

Denied and Abandoned OVDP Preclearance Requests: OVDP Background

IRS Offshore Voluntary Disclosure Program (“OVDP”) is a special program developed by the IRS to allow US taxpayers to resolve their past tax noncompliance concerning unreported foreign assets and foreign income. Under the OVDP, US taxpayers have to file delinquent FBARs and other information returns as well as amended tax returns; additionally, the taxpayers are required to pay additional tax due with interest and penalties.

In return, the IRS promises that participation in the OVDP would result in no criminal prosecution for past noncompliance. Furthermore, OVDP offers a clear and limited civil penalty exposure in the form of the Miscellaneous Offshore Penalty, which replaces all other civil penalty systems, including the draconian FBAR penalties.

What Are These Denied and Abandoned OVDP Preclearance Requests?

In order to participate in the OVDP, US taxpayers have to file a Preclearance Request with the IRS-CI (Criminal Investigation). The IRS-CI determines whether applicants are eligible to participate in the OVDP; the taxpayers who fail to meet the eligibility criteria are rejected without the possibility of further participation in the OVDP.

Additionally, especially after the Streamlined Compliance Procedures were instituted, there were a lot of taxpayers who submitted their Preclearance Requests and even certain additional information, but ultimately decided not to participate in the OVDP and/or withdrew from the OVDP. These are abandoned OVDP Preclearance Requests.

Denied and Abandoned OVDP Preclearance Requests: June of 2016 TIGTA Report

Despite the fact that the IRS was already aware of prior noncompliance of the taxpayers who submitted these denied or abandoned OVDP Preclearance Requests, it failed to do any follow-up in many of these cases. In June of 2016, TIGTA issued a report on the IRS management of OVDP. Among other matters, TIGTA recommended that the IRS review all Denied or Abandoned OVDP Preclearance Requests.

LB&I Campaign on Denied and Abandoned OVDP Preclearance Requests

Partially in response to the 2016 TIGTA report, the IRS LB&I announced an unprecedented compliance campaign on Denied and Abandoned Preclearance Requests in January of 2017. The campaign specifically targets taxpayers who were denied the participation in the OVDP or who voluntarily abandoned their Preclearance requests.

On October 26, 2017, an IRS official stated that the Denied and Abandoned OVDP Preclearance Requests Campaign is focusing on approximately 6,000 US taxpayers. It appears that the exact treatment stream will be decided on a case-by-case basis, but the IRS is hoping to review (at least at some level) this entire category of taxpayers. In other words, virtually every one of these taxpayers should expect some sort of communication from the IRS, including, potentially (and maybe even likely) full IRS audit of their tax returns and FBARs.

What Does the LB&I Campaign on Denied and Abandoned OVDP Preclearance Requests Mean for US Taxpayers

US taxpayers who abandoned their OVDP Preclearance Requests or whose requests were denied by the IRS-CI should prepare as soon as possible a viable strategy on how to deal with respect to the potential IRS audit. Right now, they are at an extremely high risk of detection and possible imposition of the IRS civil and criminal penalties.

The options are various and highly depend on the individual fact pattern of a taxpayer. In particular, a taxpayer’s legal position will depend on whether the taxpayer’s prior noncompliance was willful or non-willful and whether he abandoned his OVDP Preclearance Request or such a request was denied.

This entire analysis of a taxpayer’s legal position and available strategies for dealing with a possible IRS audit should be done by an experienced international tax lawyer who specializes in the area of offshore voluntary disclosures.

Contact Sherayzen Law Office for Professional Help With the LB&I Campaign on Denied and Abandoned OVDP Preclearance Requests

If your OVDP Preclearance Request was denied by the IRS or abandoned by you, you should contact Sherayzen Law Office for professional help as soon as possible. Our legal team is highly experienced in the area of international tax law and, specifically, offshore voluntary disclosures. In fact, we have helped hundred of US taxpayers around the globe to bring their US tax affairs into full compliance with US tax laws. We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!