Offshore Voluntary Disclosure Program
The IRS recently announced that it will “ramp down” the Offshore Voluntary Disclosure Program for expats filing taxes in the United States. The 2014 program was designed “for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets.” With such a ruling, it is important to note that program is still in effect for this year’s tax season, which, for expats, extends to June 15th (as opposed to the regular domestic deadline of April 15th). The program will not, however, continue into next year, officially closing on September 28, 2018.
If you have any disclosures you would like to make under the program, this is the year to do so.
The Offshore Voluntary Disclosure Program was created to grant immunity to people who are either confused or ignorant about the many complicated rules that make up offshore investments and income as they relate to the taxes owed to the IRS. It was always designed to be for a limited time and was set up for people to use until a time when it could be taken away. The program was a success, too, with more than 56,000 people paying $11.1 billion in back taxes, interest, and penalties.
The IRS also announced that the removal of the Offshore Voluntary Disclosure Program means they will rely on other tactics to ensure people understand and are held accountable for their offshore taxes. These programs include tax education plans, Whistleblower leads, civil examination, and, of course, criminal prosecution. The latter, while rare, can be quite significant, even in instances of ignorance.
On top of these programs, the IRS has listed the following as options for disclosing previous failures and noncompliance:
• IRS-Criminal Investigation Voluntary Disclosure Program;
• Streamlined Filing Compliance Procedures;
• Delinquent FBAR submission procedures; and
• Delinquent international information return submission procedures
If someone who owes taxes fails to use these programs and is discovered, they could face heavy fines, penalties, interest payments, and, in many cases, criminal prosecution. With such high stakes, it is important to get a better understanding of how taxes work for expats and anyone with foreign interests or incomes. Owning back taxes and paying them as a result of participation in the offshore voluntary disclosure program is always better than having to go to court and defend yourself. It’s also often cheaper since you can avoid legal fees by simply disclosing your past omissions.
If you are an expat, have offshore investments, or have an income from a foreign nation, you may be in violation of rules and regulations. In some instances, non-willful violations can be forgiven, sometimes with lowering fines or removing them altogether, but ignorance will not grant you immunity. It is in your best interest, therefore, to consult foreign tax experts that can help you sort through your taxes and ensure that you have no outstanding violations that may have happened in the past. By working with professionals, you can thoroughly evaluate your situation and still take advantage of the Offshore Voluntary Disclosure Program in its final year.
Esquire Group, a boutique international tax advisory firm specializing in tax consulting, tax planning and compliance and helping corporate and individual taxpayers with Offshore Voluntary Disclosure Program, asset protection, and US expat taxes. To learn more about us, visit www.EsquireGroup.com/About.