This month the IRS announced major changes in their offshore account tax amnesty program (called “Offshore Voluntary Disclosure Program” or OVDP). The changes will reduce penalties for many taxpayers with unreported foreign financial and bank accounts.
The OVDP program is the third amnesty program offered by the IRS since 2009. In September of 2012, we reported on a new streamlined program for certain “low risk” taxpayers. Beginning July 1st, the program will be renamed the 2014 Offshore Voluntary Disclosure program and technically become the 4th major amnesty program.
Until now, the streamlined program was only available for non residents / dual nationals that had little or no U.S. income. That program was great for American expats living overseas but not for the millions of Americans who live here but send money overseas.
In determining who is a low risk taxpayer eligible for the streamlined OVDP program, the IRS looked at a number of factors including:
- The overall income of the taxpayer
- Less than $1500 of tax due each year
- Evidence of “sophisticated tax planning or avoidance”
- “Material economic activity within the United States”
- “Amount and type of United States source income”
- History of noncompliance with U.S. tax law
- Present audit activity
- Any of the newly filed returns seeks a refund
- Offshore income not reported to country of residence
- Offshore account not located in taxpayer’s country of residence
New Offshore Voluntary Disclosure Program – OVDP 2014
As of this month, eligibility for the streamlined OVDP program has been expanded. To include more taxpayers, the IRS has:
- eliminated the requirement that the taxpayer has less than $1500 in tax due
- eliminates the above risk factor questionnaire
What is so great about the expanded streamlined OVDP program? Try no penalties if you live outside the United States and 5% for taxpayers living in the United States.
In announcing the program, IRS Commissioner John Koskinen said, “Through our enforcement efforts and implementation of FATCA, taxpayers are more aware of their obligations, and we believe want to come into compliance. In this rapidly changing environment, we listened to feedback from the tax community as well as the National Taxpayer Advocate about our voluntary programs. We have made important adjustments to provide opportunities for all U.S. taxpayers to come in, including those who are not willfully hiding assets.”
There are many changes to the program. Although the changes do not take effect until July 1st, 2014, taxpayers with pending OVDP applications can seek to participate in the new streamlined program. With so many options and changes, we sternly urge taxpayers to confer with a CPA or trained FBAR lawyer knowledgeable in offshore reporting matters.
Although many more people may be eligible for penalty waivers, the IRS has reaffirmed that if your bank is already cooperating with the IRS, the 50% penalty continues to apply. That should be a huge incentive for everyone to move quickly while they still have options.
The tax lawyers at Mahany & Ertl are available to assist taxpayers in a wide range of offshore reporting issues. We are the preferred provider for the CPAmerica organization of accounting firms and have helped taxpayers all across the United States and around the world.
For more information about the new 2014 OVDP program, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. All inquiries are protected by the attorney client privilege and kept in complete confidence.