With OVDP Ending, Are There Alternative Paths to Tax Compliance?
16 Mar, 2018, 02:22 ET
WASHINGTON, March 16, 2018 /PRNewswire/ -- In a widely anticipated move, the IRS (IR-2018-52) announced the termination of the Offshore Voluntary Disclosure Program (OVDP). With OVDP's scheduled closure on September 28, 2018, the IRS will no longer have a formal program for resolving unreported income and informational return non-compliance with a set penalty structure. Iterations of the program have been in existence since 2009. "This was a remarkably long voluntary program to address tax non-compliance," said Jim Mastracchio, a partner with Eversheds Sutherland (US) LLP. "The program not only provided protection from criminal tax investigation, it also afforded a path to compliance with both income tax reporting and informational return reporting with a set penalty structure."
While the termination of the OVDP eliminates the formal disclosure program, three other procedures remain in force for certain types of non-willful non-compliance, including the Streamline Filing Compliance Procedure. "The streamline procedure has been very helpful because qualifying taxpayers can correct the errors that were unintentional and eliminate or reduce their penalty exposure. Under the procedure, only three years of amended income tax returns are required, and there can be zero penalties for non-compliance with informational return filing obligations," explained Mastracchio. Informational returns that are often overlooked by US persons residing both within and outside of the US include FBAR reporting, ownership interests in foreign corporations or partnerships, creating or receiving benefits from certain foreign trusts, and receipts of gifts or bequests from non-US persons.
"Many circumstances can give rise to the requirement to file an informational return by a US person or green card holder and there is often misunderstanding regarding what forms need to be filed and what information should be included on them," said Mastracchio. Failure to file informational returns can carry significant civil penalties and are often calculated based upon the dollar size of the transaction or omission.
The IRS has asked for comments from practitioners as to how best to deal with willful non-compliant situations after OVDP ends. Mastracchio commented, "Unless the IRS revises its present policy, after September 28, 2018, the path to full tax compliance would likely involve direct contact with the IRS Criminal Investigation Division through its local office. Taxpayers can certainly still come into compliance, but they should seek qualified legal counsel experienced with this particular disclosure process."
About Eversheds Sutherland
Eversheds Sutherland is a global legal practice, comprising two separate legal entities with a shared culture and commitment to client service excellence: Eversheds Sutherland (International) LLP (headquartered in the UK) and Eversheds Sutherland (US) LLP (headquartered in the US), and their respective controlled, managed, affiliated and member firms. Visit eversheds-sutherland.com.
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