The Internal Revenue Service announced in early January that it has again opened the Offshore Voluntary Disclosure Program (OVDP) to allow taxpayers who have hidden offshore financial accounts to pay delinquent taxes. The IRS also announced the collection of more than $4 billion in tax revenue from previous international asset disclosure programs in 2009 and 2011.
The third run of the OVDP reflects the agency’s ongoing focus on international tax issues, which is backed by the Justice Department’s pursuit of criminal convictions for international tax evasion. The new disclosure program is similar to the 2011 program, but the IRS has established no deadlines and will remain open for an indefinite period.
In addition, penalties will increase for the highest category: U.S. taxpayers who disclose unpaid tax obligations must pay a 27.5 percent penalty on assets in foreign banks and other entities during the eight tax years leading up to disclosure, up from 25 percent under the 2011 program. However, some taxpayers with lower asset amounts to disclose will still be assessed lesser penalties of 5 percent or 12.5 percent.
The IRS has stated that it may increase penalties at any time and could decide to end the program with little notice. Potential changes could affect only some defined classes of taxpayers and not others.
The potential for quickly changing tax policy is a very good reason for taxpayers to consult with a tax attorney about international disclosure and a person’s potential need for criminal tax representation. Along with recent amendments to federal regulations regarding Foreign Bank and Financial Accounts (FBAR), several significant changes have recently occurred that have high relevance for Americans who have funds in offshore accounts.
