The IRS has simplified the process of entering the OVDP Program by issuing the following…
The IRS Large Business and International division (LB&I) has announced a new Post OVDP Compliance enforcement campaign
The new Post OVDP Compliance enforcement campaign was recently identified through LB&I data analysis and suggestions from IRS employees. IRS employees likely saw that many taxpayers were not properly reporting offshore bank accounts, as a result, they suggested the campaign. The IRS Post OVDP Compliance enforcement campaign goal is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of IRS limited resources.
The IRS launched the Offshore Voluntary Disclosure Program (OVDP) in 2009 to encourage compliance with foreign asset reporting. U.S. persons are subject to tax on worldwide income from all sources including income generated outside of the United States. It is not illegal or improper for U.S. taxpayers to own offshore structures, accounts, or assets. However, taxpayers must comply with income tax and information reporting requirements associated with these foreign activities, otherwise they are subject to penalties and possible criminal prosecution.
OVDP was structured as a tax amnesty program since it allowed U.S. taxpayers to come forward and avoid criminal prosecution for not reporting foreign accounts. In 2011, in response to the Foreign Account Tax Compliance Act (FATCA), the IRS announced a new amnesty program to take the place of the 2009 program; the official title was the 2011 Offshore Voluntary Disclosure Initiative (OVDI). In 2014, the IRS modified the program yet again. At the time of the relaunch, the IRS made it clear that there would be no set deadline for taxpayers to apply for the program, and in March of 2018, the IRS announced the program would be ending.
The IRS is now actively targeting taxpayers’ failure to remain compliant with their foreign income and asset reporting requirements. Via FATCA and subpoenaed bank records, the IRS is now in possession of records that identify taxpayers with transactions or accounts at offshore private banks.
This campaign indicates the IRS’ renewed focus on OVDP and taxpayers’ foreign activities.
The IRS will initially address tax noncompliance through audit examination and soft letter treatment streams. Soft letters are IRS correspondence to targeted taxpayers identifying tax noncompliance and passively seeking compliance. Failure to respond to such letters may result in audit or penalties and possible criminal prosecution.
This campaign indicates the IRS’ renewed focus on OVDP cases and taxpayers’ foreign activities. We expect increased audit activity for clients with noncompliant foreign activities.
Patel Law Offices has consulted with hundreds of clients regarding their offshore asset and income compliance issues. 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 assets.