Gresham|Savage Tax Update: IRS terminating offshore Voluntary Disclosure Program: Do You Have Undisclosed Foreign Assets?

May 20, 2020

The Internal Revenue Service (“IRS”) has announced that it will close the Offshore Voluntary Disclosure Program (“OVDP”) on September 28, 2018.

Since the OVDP’s launch in 2009, more than 56,000 taxpayers have used the OVDP to resolve failures to properly report their foreign (i.e. overseas or offshore) assets.  Without OVDP, penalties for failures to properly report foreign financial assets can be as high as 100% of the value of the foreign account or asset, and can also result in criminal prosecution. The reduced penalties offered under the OVDP created an incentive for U.S. taxpayers to voluntarily disclose their foreign assets.  Over the last 8 years, U.S. taxpayers participating in the OVDP have voluntarily paid $11.1 Billion in back-taxes, interest and penalties.

The IRS announcement to shutter the OVDP before year’s end came as no surprise. The IRS has always indicated that the OVDP was temporary and the IRS began hinting in November 2017 that the termination was forthcoming. The number of disclosures has steadily declined each year since 2011, falling to only 600 disclosures in 2017. The IRS indicated that the continued decrease in the number of disclosures suggests: (i) an increased awareness among U.S. taxpayers of their offshore tax and reporting obligations, and (ii) advances in third-party reporting.

Although OVDP is scheduled to be closed this year, other programs will remain available to assist taxpayers:

  • IRS-Criminal Investigation Voluntary Disclosure Program;
  • Streamlined Filing Compliance Procedures for taxpayers who were “unaware” of their reporting and filing obligations;
  • Delinquent FBAR submission procedures; and
  • Delinquent international information return submission procedures.

Taxpayers considering making a voluntary disclosure of foreign assets to the IRS should first seek legal representation from an attorney experienced in tax and each of the IRS disclosure programs.

David E. Foate works within the Business practice group of Gresham|Savage. His practice focuses on the state and federal tax complexities inherent in the lives of business owners and their families. He can be contacted at 909.890.4499 or [email protected]

This Tax Update is for educational purposes only and is not intended to provide legal counsel or serve as legal advice.  Any tax advice contained in this Tax Update is not intended or written to be used, and cannot be used, by you or any other recipient for the purpose of (a) avoiding penalties that may otherwise be imposed by the IRS, or (b) supporting, promoting, marketing, or recommending any transaction or matter to any third party.  If you have a legal matter, it is best to consult the advice of an attorney. You can talk with David Foate or another experienced attorney at Gresham|Savage by calling (909) 890-4499 (Inland Empire) or (619) 794-0050 (San Diego).

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