Background—OVDP. On Mar. 26, 2009, IRS announced its first OVDP (2009 OVDP), a form of a tax amnesty program. It permitted U.S. taxpayers with unreported foreign accounts to avoid criminal charges and pay reduced civil penalties by making a voluntary disclosure to IRS. The 2009 OVDP ran through Oct. 15, 2009.
Thereafter, on Feb. 8, 2011, IRS announced a second OVDP (2011 OVDP). The 2011 OVDP was originally scheduled to close on Aug. 31, 2011, but IRS extended the closing date to Sept. 9, 2011.
On Jan. 9, 2012, IRS reopened the OVDP (2012 OVDP). On June 18, 2014, IRS announced changes to the 2012 OVDP, which took effect on July 1, 2014.
Unlike the previous programs, the 2012 OVDP is open-ended and does not impose a deadline by which taxpayers must make a voluntary disclosure to be eligible for avoiding criminal prosecution and pay reduced penalties. However, IRS has indicated that it can terminate the program at any time.
Background—streamlined filing. IRS has also established streamlined programs for taxpayers who have unreported foreign accounts and whose reporting failures are considered non-willful. There are separate programs for U.S. taxpayers residing in the U.S. and for U.S. taxpayers residing outside the U.S. The qualifications for the programs vary. By way of example, to be eligible for the program for residents, taxpayers must have previously filed a U.S. tax return (if required) for each of the most recent three years and have failed to report gross income from a foreign financial asset and pay tax as required by U.S. law as a result of negligence, inadvertence, mistake, or a good faith misunderstanding as to what was required of them.
Taxpayers who come into compliance under the streamlined filing procedures must file amended returns (with all required information returns) for the most recent three years, file any delinquent Reports of Foreign Bank and Financial Accounts (FBARs) for the most recent six years, and pay an offshore penalty equal to 5% of the highest aggregate balance/value of the taxpayer's foreign financial assets that are subject to the miscellaneous offshore penalty during the 3-year tax return period and 6-year FBAR period.
IRS milestones. In
IR 2016-137, IRS stated that 55,800 taxpayers have used the OVDP to resolve their tax obligations, paying more than $9.9 billion in taxes, interest, and penalties since 2009. In addition, 48,000 taxpayers have used separate streamlined filing procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450 million in taxes, interest, and penalties. Combined, this adds up to over $10 billion collected and over 100,000 taxpayers coming into compliance.
“As we continue to receive more information on foreign accounts, people's ability to avoid detection becomes harder and harder,” said IRS Commissioner John Koskinen. “The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.”
New forms. IRS recently revised the certification forms used for the Streamlined Filing Compliance Procedures. The most current versions of Forms 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, and 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures, are available on IRS's website.
