IRS Amnesty Program 2016 Update

Boston IRS Amnesty Attorney Explains 2016 Updates

The Internal Revenue Service recently announced important modifications to its 2012 Offshore Voluntary Disclosure Program (OVDP).  These updates include expanding the streamlined filing process for non-willful violations and implementing key program changes focused on willful violators seeking to avoid criminal prosecution by participating in the OVDP.  

The IRS first launched the OVDP program in 2009 in order to encourage taxpayers with undisclosed foreign accounts to voluntarily come forward and report their accounts to the IRS.    Taxpayers living in the United States and residing abroad are required to make an annual disclosure of their offshore accounts to the IRS and meet all tax obligations associated with their offshore financial activities.  Taxpayers who fail to comply with IRS requirements can face substantial fines and serious penalties under U.S. law.

Expanded Streamlined Filing Process for Non-Willful Violations

In June 2014, the IRS revised the OVDP streamlined filing compliance process for non-willful violators seeking to bring their offshore accounts and assets into compliance with U.S. tax laws and regulations.  The IRS implemented these changes in order to provide increased options for taxpayers living abroad and in the United States to report their previously undisclosed foreign financial accounts to the IRS and meet their U.S. tax obligations.  The 2014 IRS modifications to the streamlined filing process include:  

1. Expanding eligibility to include a wider population of U.S. taxpayers residing abroad and, for the first time, permitting certain U.S. taxpayers living within the U.S.  to participate in the streamlined process;
2. Eliminating the previous requirement that the taxpayer have $1,500 or less in unpaid tax liabilities per year;
3. Eliminating the risk questionnaire applicants were required to submit to participate in the program;
4. Requiring that taxpayers must now certify that their previous failures to comply with the offshore reporting requirements were due to “non-willful” conduct; and
5. For eligible taxpayers living outside of the U.S., the IRS will waive all penalties for non-willful violations; for non-willful taxpayers living in the U.S. the IRS will only impose a miscellaneous offshore penalty of five percent of the foreign assets that were not reported.

Taxpayers who may have failed to properly report their offshore accounts and assets should consult with an experienced Boston IRS amnesty attorney to determine whether they may be eligible to participate in the expanded OVDP streamlined filing process. The tax law team at Thorn Law Group has helped hundreds of taxpayers in the Boston region, across the nation and overseas to properly report their foreign financial accounts and come into full compliance with their legal obligations.

Important Program Changes for Willful Violations

The 2014 updates to the OVDP also contain important changes for taxpayers who may have taken actions to willfully hide their assets and accounts from the IRS in order to avoid paying taxes to the U.S. government. Willful violators who want to avoid criminal prosecution by participating in the IRS tax amnesty initiative will have to comply with several new program requirements and conditions, including:

1. Providing more information than in the past to the IRS when applying to participate in the OVDP;
2. Submitting all account statements when making an application to the OVDP;
3. Paying the offshore penalty at the time of the OVDP application; and
4. Paying an increased offshore penalty percentage (50% penalty instead of 27.5%) if it becomes public that the IRS or the Department of Justice (DOJ) has initiated an investigation of the financial institution where the taxpayer’s accounts are held before the taxpayer submits a pre-clearance request to the IRS.

With these changes, the IRS is sending a clear message that it remains more committed than ever to uncovering and combatting offshore activities used to evade U.S. tax obligations.  Both the IRS and the DOJ are dedicating more resources to investigating foreign financial institutions and the Foreign Account Tax Compliance Act (FATCA) became effective on July 1, 2014.  As a result of these developments, taxpayers with undisclosed offshore accounts and unpaid tax obligations will be under increased government scrutiny and examination.  

Since 2009, more than 45,000 taxpayers have come forward to participate in the IRS Offshore Voluntary Disclosure Programs.  If you have unreported foreign accounts you need to act quickly to take advantage of the reduced penalties offered by OVDP.   An experienced IRS amnesty attorney in our Boston, Washington D.C. or New Jersey office will review your situation to identify the best options available to resolve your offshore account issues.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989