The day has finally come to pass where the IRS has announced that they will end its major US tax amnesty program, the Offshore Voluntary Disclosure Program (OVDP). This program, in addition to the streamlined filing program and other international variants, was created to provide non-compliant US tax payers residing beyond their shores with the opportunity to remedy and address any outstanding tax responsibilities. This included filing returns, paying any back taxes owed, and re-entering the fold of US federal tax compliance. The OVDP is the most extensive (some might say onerous) of these programs. It allowed for taxpayers with potentially serious liabilities to make a voluntary disclosure of their tax situation, pay any due interest and penalties, without becoming subject to possible charges of criminal tax evasion. The program mainly involved negotiated settlements and required eight years of back submissions, along with the disclosure of foreign bank accounts as required under the FBAR filing mandate.
The program has been in existence since 2009 and has been fraught with challenges ever since. Despite its comprehensive nature and the sheer extent of the required submissions, it was viewed as an equitable system for taxpayers with significant tax issues to wipe the slate clean with the IRS. The program was offered by the grace of the IRS as a prelude to the enforcement of the Foreign Account Tax Compliance Act, better known as FATCA. FATCA has now been implemented, with most countries having actively begun providing annual reporting of US tax payer account information. The IRS demonstrably feels that it no longer needs to provide this specific amnesty program, able as it is now to easily identify non-compliant tax payers, using the information obtained either from financial institutions or from other tax authorities throughout the world.
The program’s projected expiry date is 28 September 2018. This leaves those tax payers concerned with only six more months to enter into the program. Accordingly, those tax payers who do not qualify for the other programs, due the level of taxes owed or intentional failure to submit returns, MUST contact their tax adviser to help them enter this program, or face the potential wrath of the IRS later on. In the past, shirking or ignoring these problems had been a plausible option. With the advent of FATCA, precious little room to maneuver remains in terms of avoiding US tax submission and payment obligations. The IRS will now have all the information they need to aggressively pursue non-compliant US individuals, now shorn of their ability to turn to an amnesty alternative.
Anyone who suspects they may have an issue is strongly advised to seek out their tax advisor as quickly as possible to avoid potentially significant criminal charges, travel limitations due to passport renewal denials, or other means of enforcement.