IRS Reopens Offshore Voluntary Disclosure Program (OVDP)

In a news release today, the Internal Revenue Service (IRS) announced the reopening of the offshore voluntary disclosure program (OVDP). The program is intended to help people with hidden offshore accounts come into compliance with U.S. tax laws and pay back taxes.

IRS Commissioner Doug Shulman said, “As we’ve said all along, people need to come in and get right with us before we find you.”

This is the third time the IRS has offered the program. Previous OVDP programs ended in 2011 and 2009.

According to the IRS website, this program is similar to 2011 OVDP program but with a few important differences:

  • There is no set deadline for people to apply.  However, the terms of the program could change at any time going forward or end entirely.
  • The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.
  • For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.
  • Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.
  • Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.
  • The IRS is currently developing procedures by which dual citizens and others who may be delinquent in filing, but owe no U.S. tax may come into compliance with U.S. tax law.

We will continue to update you on new information about the OVPD program as it becomes available.

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