Government Affairs

Deadline Looms for U.S. Overseas Accounts Voluntary Disclosure Program

On 4 September 2018, the U.S. Internal Revenue Service (IRS) reminded taxpayers that the Offshore Voluntary Disclosure Program (OVDP) is scheduled to close on 28 September 2018, and that applications thereafter will be rejected.

This is a program that in various forms has been running since 2009. It allows taxpayers who have failed to disclose and pay tax on offshore accounts to come forward voluntarily in exchange for relief from criminal prosecution and reduced penalties. The IRS announced in March that the program would end 28 September, and is now reminding taxpayers of that deadline.

Since 2009, more than 56,000 taxpayers have used the program to come into compliance with United States tax laws, and have paid a total of $11.1 billion in back taxes, interest, and penalties, according to the IRS. However, the number of taxpayers coming forward has steadily declined, with only some 600 applications in 2017.  

The IRS says it will continue to maintain a separate program, the Streamlined Filing Compliance Procedures, which is used by taxpayers who simply didn’t understand their reporting responsibilities but owe minimal taxes. About 65,000 taxpayers have used that program.

The IRS credits implementation of the Foreign Account Tax Compliance Act (FATCA), under which it receives reports of foreign bank accounts from the institutions in which the accounts are maintained, or from the countries in which those accounts are maintained, for increasing compliance and decreasing the need for the OVDP. It also credits aggressive compliance efforts with reducing foreign noncompliance. According to IRS, since 2009, some 1,545 taxpayers have been indicted and prosecuted for international tax avoidance.  

Related: U.S. Treasury Proposes Regulations to Stop Workarounds of State & Local Tax Deduction Limit

How This Impacts Mobility

For employees working overseas, reporting of foreign accounts is a sometime overlooked requirement. Some expats have also underpaid taxes from accounts maintained abroad.  Worldwide ERC® has long urged members to make sure employees are aware of these obligations, and with the removal of one avenue of relief, that advice is even more important going forward.

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