On November 15, 2017, the IRS sent yet another signal that certain offshore voluntary disclosure options, particularly the OVDP & Streamlined Disclosure options, will be significantly modified or even terminated as the IRS proceeds with the LB&I Compliance Campaigns. This means that US taxpayers with undisclosed foreign accounts need to hurry up if they wish to proceed with their offshore voluntary disclosure utilizing the OVDP or the Streamlined Compliance Procedures.
OVDP & Streamlined Disclosure Termination: What Did the IRS Say?
The latest signal on the termination of the OVDP & Streamlined Disclosure options came from Mr. John Cardon (director of the withholding and international compliance area within IRS LB&I) and Mr. Daniel Price, an attorney with the IRS Office of Chief Counsel, Small Business/Self-Employed Division in Austin, Texas.
Both IRS officials emphasized that the current Offshore Voluntary Disclosure Program and the Streamlined Filing Procedures are likely to terminate soon. Mr. Price emphasized the fact that these voluntary disclosure options were always intended as special offers that were bound to end at some point.
The possibility that the IRS wishes to terminate the Streamlined Disclosure options in addition to OVDP is somewhat sudden and premature. The IRS already stated in the past that it is no longer satisfied with the OVDP, but it never complained about the Streamlined Compliance Procedures (which have been highly successful with over 18,000 disclosures just in the last year). It is also not clear whether the IRS wishes to completely terminate all OVDP and Streamlined Disclosure options or whether the Streamlined Filing Procedures will survive in one form or another.
Why the IRS Wishes to End OVDP & Streamlined Disclosure Options
There is more than one reason behind the current IRS drive to end or significantly modify the existing voluntary disclosure options. Let’s focus on the two most important of them.
First, the existing voluntary disclosure options are rapidly losing value as a source of new information regarding offshore noncompliance with US taxes. FATCA has created an enormous and continuously expanding network of automatic information exchange between the IRS and foreign financial institutions. Moreover, other automatic information exchanges mechanisms have successfully filled most of the gaps left by FATCA.
In other words, now that offshore tax compliance and automatic international information exchanges have become a worldwide norm, the IRS does not need voluntary disclosures to obtain new information about offshore tax noncompliance.
Second, there has been a systemic change to a different model of tax administration. As the IRS officials emphasized on November 15, 2017, 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 LB&I Compliance Campaigns – to concentrate its limited resources on tax enforcement where it is most needed rather than engage in broad efforts with respect to voluntary correction of past errors. Hence, in an environment where enforcement dominates over voluntary disclosures, the utility of the IRS voluntary disclosure options becomes more and more limited.
OVDP & Streamlined Disclosure Termination: When Will the IRS Announce the Termination of the Current OVDP & Streamlined Disclosure Programs?
It appears that the IRS will make the appropriate announcement for the termination of the voluntary disclosures prior to the end of January of 2018.
Will the Termination of Current OVDP & Streamlined Disclosure Programs Happen Immediately or Sometime After the Announcement?
It appears that, even after its announcement of the termination of the OVDP & Streamlined Disclosure options, the IRS will provide some time for the taxpayers to finalize their on-going disclosures. Mr. Cordone even stated that the voluntary disclosure programs’ termination date could be as far away as one year from the date of the IRS announcement of such a termination.
Will the End of OVDP & Streamlined Disclosure Programs Also Mark the End of IRS Voluntary Disclosures Per Se?
While the recent IRS moves are of great concern, they should not be taken as the end of the IRS voluntary disclosures per se with no options available to remedy one’s past tax noncompliance with respect to offshore accounts. Rather, I expect that the IRS voluntary disclosures will simply shift to different options. It is beyond the scope of this article to discuss these potential voluntary disclosure options, but it is reasonable to assume we will find ourselves in situation somewhat reminiscent of the period of time between the end of 2011 OVDI and the beginning of 2012 OVDP.
If, however, a taxpayer wishes to take advantage of the existing voluntary disclosure options, the taxpayer should contact Sherayzen Law Office as soon as possible to make sure that the voluntary disclosure can be completed before the IRS closes OVDP & Streamlined Disclosure Program.
Contact Sherayzen Law Office for Professional Help with Your Offshore Voluntary Disclosure, including the OVDP & Streamlined Disclosure Options
If you have undisclosed foreign accounts or any other foreign assets, you should contact Sherayzen Law Office for professional help as soon as possible. Our international tax firm is highly experienced in successful completion of offshore voluntary disclosures for clients with foreign assets in close to 70 countries. We can help You!