Tax Law Center Blog

The Taxpayer Advocate Service (TAS) has issued a new mid-year 2013 report.  The TAS report discussion regarding optouts out of the OVDI/OVDP is interesting. For the 2009 OVDP (which was a smaller group of applications compared to 2011 OVDI), there were 290 optouts (vs. 10,735 cases closed after certification, or about 3% opted out) taking an average of 563 days to conclude. In previous TAS reports, TAS reported that the average penalty for 2009 optouts was about $15,000 with zero criminal prosecutions.

For the 2011 program, there have been 323 optouts so far compared to 3,666 closed after certification, or about 9% opt out rate. (I am comparing the number of optouts to number closed after certification, not number of total cases, since it seems likely that the decision to opt out would be generally made at the time that certification is complete.) 8,849 OVDI cases remain open and can still optout. We expect a greater percentage of such cases to optout because remaining cases are probably larger (we found smaller OVDI cases were processed first) and more complicated.

Of the 323 optouts, only one third have closed (which took an average of 166 days) and 2/3 are still open. We expect a larger pool of optouts in the future. The IRS has also started to establish exclusive “optout” offices, which probably means that more optouts are expected.

Regardless, while opting out of the OVDI or OVDP amnesty programs may result in a reduction of penalties that may otherwise be assessed, the taxpayer needs to carefully weigh the numerous consequences before doing so. Responsible tax professionals should discuss the consequences of opting out with the client before making such a recommendation.

While a careful analysis is required to ascertain whether an optout is advantageous, our law office has represented numerous taxpayers with optouts with successful results.

Patel Law Offices has consulted with dozens of clients regarding opt out decisions of their OVDI applications. Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.