On October 26, 2017, the IRS sent a clear signal that OVDP changes are coming soon. The signal that the 2018 OVDP changes are imminent came from Mr. Daniel Price, an attorney with the IRS Office of Chief Counsel, Small Business/Self-Employed Division, who participated in a panel discussion of offshore accounts and compliance at the University of San Diego School of Law (at a Procopio International Tax Institute Annual Conference).
What Are the Main Reasons for the 2018 OVDP Changes?
There are four main reasons for the upcoming 2018 OVDP changes. First, the OVDP program has been heavily criticized for lack of transparency by tax lawyers and the National Taxpayer Advocate’s Nina Olson. Ms. Olson’s report in June of 2017 and the Freedom of Information Act requested from Tax Analysts forced the IRS to recently release its OVDP hotline guide.
Second, there is a very specific but painful and largely unaddressed issue of the relationship between bankruptcy and the ability to participate in the OVDP. As a reminder to readers, the OVDP FAQs currently require the payment of all liabilities, including the miscellaneous offshore penalty, with the submission of the OVDP voluntary disclosure package. Mr. Price stated that a new FAQ will be added to OVDP to specifically address whether taxpayers in bankruptcy or contemplating bankruptcy will be able to use the OVDP process.
Third, the value of the OVDP as an information collection tool has greatly diminished as a result of FATCA and other automatic information exchange mechanisms.
Finally, fewer and fewer taxpayers are participating in the OVDP. Between 2015 and 2016, only about 1,800 OVDP disclosures were made. At the same time, there were almost 18,000 Streamlined submissions made by US taxpayers in the United States and overseas.
Potential 2018 OVDP Changes: Could the OVDP Program End in 2018?
There is a possibility of the OVDP program ending in 2018. Such a dramatic development, however, may cut off any voluntary disclosure possibilities for willful taxpayers who wish to bring their US tax affairs into full compliance, but are too afraid to do so without a guarantee that they will not be criminally charged. For this reason, I believe that it is more likely that the OVDP program will be modified, but not cancelled.
Sherayzen Law Office Will Continue to Follow Any Potential 2018 OVDP Changes
Sherayzen Law Office will continue to monitor any new developments with respect to changes to the current OVDP. OVDP currently constitutes an integral part of our practice of international tax law and it remains one of the main voluntary disclosure options that every US taxpayer with past noncompliance should consider.