On March 13, 2018 the U.S. Internal Revenue Service (IRS) announced it will be shutting down the Offshore Voluntary Disclosure Program (OVDP) in September.
The program was launched in 2009 by the IRS. The OVDP was designed for individual U.S. taxpayers who had assets offshore, knew they should have been reporting them and the income they generate and failed to do so. In other words, it was for the people hiding money and income abroad.
Taxpayers using the OVDP pay a penalty of 27.5 percent or 50 percent of the assets held abroad, in addition to tax, interest and potentially a 20 percent accuracy related penalty on unreported income. While these penalties are significant, they can often be smaller than the regular penalties. More importantly, filing under the OVDP precludes criminal prosecution.
The IRS believes taxpayers have had enough time to "come in from the cold." and therefore, is closing down the program effective September 28, 2018. Complete submissions must be made by that date to qualify.
Alternatives Post-OVDP
After the closing date, taxpayers who willfully concealed assets or income will have to use alternative approaches. The IRS indicates it will develop such approaches and publicize them before the closing date. The IRS is seeking input from the public for such approaches. You can write to the IRS with ideas at lbi.practice.unit.public.feedback@irs.gov.
Streamlined Filing Compliance Procedures
The OVDP is separate from the Streamlined Filing Compliance Procedures. The Streamlined programs are designed for people who didn't know they had to file, or didn't know they had to include their foreign income on their U.S. returns. The majority of filers under these programs have been Americans living abroad who only recently learned about their U.S. status or the tax obligations that came along with it.
The Streamlined programs will continue to be available for the foreseeable future, but the IRS has warned that they may be withdrawn at any time as well.
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