New offshore voluntary disclosure program (OVDP) changes expected to be favorable to taxpayers

During Internal Revenue Service (IRS) Commissioner John Koskinen’s remarks at a speech before the United States Council-OECD International Tax Conference in Washington last week, he indicated that the agency is preparing a new offshore voluntary disclosure program (OVDP) that will be easier on “law-abiding” American residents abroad.

Koskinen disclosed that, “while the 2012 OVDP and its predecessors have operated successfully, … [the IRS is] considering whether voluntary programs have been too focused on those willfully evading their tax obligations and are not accommodating enough to others who do not necessarily need protection from criminal prosecution because their compliance failures have been of the non-willful variety.”

“For example, we are well aware that there are many US citizens who have resided abroad for many years, perhaps even the vast majority of their lives. We have been considering whether these individuals should have an opportunity to come into compliance that does not involve the type of penalties that are appropriate for US-resident taxpayers who were willfully hiding their investments overseas.”

“We are also aware that there may be US-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion,” he continued, “but who, to date, have not had a clear way of coming into compliance that does not involve the threat of substantial penalties.”

He confirmed that the IRS is close to completing and announcing modifications to the current OVDPs, with the target of ensuring that it has “struck the right balance between emphasis on aggressive enforcement and focus on the law-abiding instincts of most US citizens who, given the proper chance, will voluntarily come into compliance and willingly remedy past mistakes.”

We hope that taxpayers (including our clients) currently in the program under 2011 OVDI or 2012 OVDP will be able to take advantage of the program modifications.

Koskinen predicted that more details about the OVDP are expected to be available in coming weeks as the July 1 FATCA implementation date approaches. So stay tuned.  In the meantime, taxpayers can expect the worse in terms of tax enforcement.

Leave comment