By: William L. Bricker, Linda Galler & Inhyuk Yoo
On September 17, 2021, the IRS Large Business and International Division (“LB&I”) retired its Offshore Voluntary Disclosure Program Declines-Withdrawals Campaign.
Offshore Voluntary Disclosure Program (“OVDP”)
OVDP was an IRS program initiated in 2009 that allowed U.S. taxpayers voluntarily to resolve non-compliance relating to unreported offshore income or assets, minimizing the risk of criminal prosecution. Approximately 60,000 taxpayers resolved their non-compliance through this program, which ended in September 2018.
OVDP Declines-Withdrawals Campaign
Some applicants to OVDP were denied access to[1] or voluntarily withdrew from the program. To target these taxpayers, LB&I in 2017 initiated the OVDP Declines-Withdrawals Campaign, which included the issuance of “soft letters” for immaterial non-compliance and examination for material non-compliance. This campaign has continued until its cancellation last week. (Enforcement efforts with respect to taxpayers who were admitted to OVDP are ongoing.)
Alternatives to OVDP
Although OVDP is no longer available, taxpayers who have failed to report their offshore income or assets still have the following options to come into compliance:
IRS Voluntary Disclosure Practice:
A longstanding practice of the IRS Criminal Investigation unit.
Requires payment of tax, penalties, and interest[2] but provides a reduced risk of criminal prosecution.
Streamlined Filing Compliance Procedures:
Provides reduced civil penalties (up to 5%).
Available only to non-willful violators.
Separate procedures exist for U.S. taxpayers residing in and outside the U.S.
Quiet Disclosure:
Simply filing delinquent tax and information returns.
No protection from penalties and criminal prosecution.