Taxpayers take note: The IRS' principal amnesty program for offshore assets will soon no longer be an option.
In March, the IRS announced that it will be closing the Offshore Voluntary Disclosure Program ("OVDP"), shutting the door on the best opportunity for taxpayers with previously undisclosed foreign accounts and assets to come forward without facing civil penalties that can amount to 3-4 times the value of their total foreign accounts and/or assets. The first iteration of the IRS' OVDP program was made available in 2009, and since then, the IRS has made considerable progress (through the signing of many intergovernmental agreements with other countries and the increased information sharing resulting from them) in identifying taxpayers with unreported offshore accounts and/or assets. On top of the civil penalties that taxpayers have been able to avoid over the last 9 years through OVDP, coming forward has also given taxpayers a much better chance of avoiding criminal prosecution for these failures to disclose. According the IRS, over 1,500 taxpayers have been criminally indicted for their alleged offshore activities since the original OVDP program was offered to taxpayers in 2009.
The IRS has confirmed that the Streamlined disclosure programs they've been offering to taxpayers as an alternative to OVDP - both domestic and non-domestic (applicable to U.S. taxpayers that meet certain requirements based on living abroad) - will continue. However and importantly, the Streamlined programs are only available to taxpayers that certify, under penalty of perjury, that they were non-willful in their previous failures to disclose and report their offshore activity. If taxpayers certify that they were non-willful and are later determined to have purposefully failed to disclose these activities, they may face criminal prosecution for making false statements, in addition to being unable to avail themselves of any civil relief provided by OVDP or either streamlined program.
The OVDP's obvious advantage is that willfulness is irrelevant; as long as the taxpayer comes forward before their failure to disclose is discovered by the taxing authorities, they have the opportunity to pay a civil penalty much lower than they would face if audited, as well as greatly improving their chance to avoid a criminal referral to the Department of Justice. But the time available for taxpayers to take advantage of the OVDP program is shrinking, while the avenues the IRS has to discover these taxpayers' failures to disclose have never been greater. As the IRS release states, "[t]he planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations." That statement should make it clear that for those taxpayers that know they have the obligation to disclose their offshore assets and/or accounts but have yet to do so, their best chance to come forward will soon be gone.
The IRS' release, IR-2018-52, can be seen here: The end of OVDP.