The IRS ended its
Offshore Voluntary Disclosure Program (OVDP) in September of 2018. Although OVDP has been discontinued, the IRS has introduced new guidelines for voluntary disclosures. These guidelines are intended to be used by taxpayers who are subjected to criminal exposure for their disclosures. The guidelines are applicable to both offshore and domestic disclosures.
By offering reduced monetary penalties and less chance of
criminal prosecution, the OVDP was intended to provide an incentive for taxpayers to bring themselves into legal compliance for past tax years. Avoiding criminal and civil liability is still possible under the new system, but you are strongly encouraged to seek help from a skilled criminal tax lawyer as soon as possible.
A Little Info About the Discontinued OVDP
The OVDP was originally implemented in 2009. Under the most recent OVDP guidelines, taxpayers with
foreign income and assets were obligated to do the following:
- Pay penalties on all previously unreported foreign income.
- Pay an offshore penalty on the highest aggregate value during the 8-year period of previously unreported foreign assets.
- Report all previously undisclosed foreign assets or income for the last eight years, by filing or amending tax returns and Foreign Bank Account Reports (FBARS).
New Voluntary Disclosure Guidelines
The new voluntary disclosure guidelines have some significant differences from OVDP and other previously issued guidelines, including the following:
Changes in Appeal Rights
Taxpayers will now have expanded rights to appeal tax liabilities assessed due to voluntary disclosures.
Longer IRS Auditing Window
The OVDP allowed the IRS to
audit the last eight years. Under the new guidelines, the IRS can audit all past years of noncompliance. However, the IRS will generally audit the last six years.
Domestic Disclosure Guidelines Now Conform With Offshore Guidelines
Prior to the new guidelines, the IRS had different guidelines for voluntary disclosures of domestic and foreign income and assets. The disclosure guidelines now apply to taxpayers with both domestic and foreign income and assets.
Penalties for Failure to Pay or File Taxes
The tax underpayment penalty has increased from 20 percent to 75 percent of the underpaid amount. This is known as a civil fraud penalty.
Willful FBAR Penalties
Penalties for willful FBAR penalties will now generally be limited to 50 percent of the highest aggregate balance of all unreported foreign assets during the disclosure period. However, IRS agents have discretion to recommend a higher or lower penalty, depending on the facts and circumstances.
Thorn Law Group, led by founding tax attorney and managing partner Kevin E. Thorn, is an experienced and sought after tax litigation law firm focused on successfully representing your sensitive federal tax disputes, tax controversies and tax litigation problems.
Kevin E. Thorn - ket@thornlawgroup.com | Managing Partner
