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July 1, 2014 Changes to Offshore Programs

| Jun 23, 2014 | Uncategorized

On June 18, 2014 the IRS announced major changes in its offshore voluntary compliance programs. The changes include an expansion of the streamlined filing compliance procedures announced in 2012 and important modifications to the 2012 Offshore Voluntary Disclosure Program (OVDP). The expanded streamlined procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was non-willful. In addition, on July 1, 2014, the new information reporting regime resulting from the Foreign Account Tax Compliance Act (FACTA) will go into effect. Thousands of foreign financial institutions will begin to report to the IRS the foreign accounts held by U.S. persons.

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. For eligible U.S. taxpayers residing outside of the United States, all penalties will be waived. For eligible U.S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the compliance issue.

Under the transitional rules, taxpayers who made an OVDP submission prior to July 1, 2014 may elect to have their case considered under the new rules as long as the case has not yet been resolved by means of a closing agreement.  The purpose of transitional treatement under OVDP will allow taxpayers currently participating in OVDP who meet the eligibility requirements for the expanded Streamlined Filing Compliance Procedures announced on June 18, 2014, an opportunity to remain in OVDP while taking advantage of the favorable penalty structure of the expanded streamlined procedures.

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