Here at Levins Tax Law,, we advise people in Massachusetts, across the country and internationally who have offshore accounts and other assets outside of the U.S. about their federal tax reporting requirements and about how to respond to IRS inquiries into these accounts.
Briefly, people with signing authority in or ownership of certain foreign financial accounts may be required to file with the Treasury Department an annual form called Report of Foreign Bank and Financial Accounts, also called an FBAR or a FinCEN 114. FBARs are due every April 15 (a separate requirement from normal tax returns due then), with an automatic six-month extension.
We also advise such taxpayers about their options for communicating with the authorities and the pros and cons of these options, including the Offshore Voluntary Disclosure Program or OVDP.
OVDP to terminate
A version of this program has been in existence since 2009. The IRS just announced that the 2014 OVDP will end on September 28, 2018, so taxpayers with undisclosed foreign assets and accounts will have until then to decide whether to come forward and use the program.
According to the IRS, at least 56,000 taxpayers have used one of the OVDPs since their inception. The agency says it is ending the program because of “advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.”
Offshore account reporting still a priority
Despite the voluntary disclosure program, the IRS continues to pursue those it believes may be out of reporting compliance for offshore accounts, an ongoing priority of the agency. For example, it follows up on whistleblower tips, uses “data analytics,” conducts audits and even pursues criminal prosecutions.
One program that will continue, at least for now, after the OVDP ends in late September is the Streamlined Filing Compliance Procedures program that can be used for certain individual taxpayers (or estates of individuals) whose noncompliance with offshore reporting requirements was not willful.
A variety of options will continue to exist. It is crucially important that anyone with concerns about possible noncompliance with offshore reporting requirements should speak with an experienced tax attorney as soon as possible. Discuss with legal counsel the pros and cons of using the OVDP before its September 28 expiration as well as other options.
Significant civil penalties as well as criminal liability can result in these cases, so it is smart to be proactive in getting qualified legal advice without delay.