The Internal Revenue Service announced in IR-2018-52 on March 13, 2018 that it will close the OVDP program on Sept. 28, 2018. “Taxpayers Have Had Several Years to Come into Compliance with US Tax Laws under This Program,” Said Acting IRS Commissioner David Kautter. “All along, We Have Been Clear That We Would Close the Program at the Appropriate Time, and We Have Reached That Point. Those Who Still Wish to Come Forward Have Time to Do So.”

The Government has also add in August Atlas Capital, S.A. (effective 8/21/2018) and Basler Kantonalbank (effective 8/28/2018) to this list bringing the number to 150 Offshore Banks and Foreign Financial Advisors. The IRS keeps updating its list of foreign banks which are turning over the names of their US Account Holders, who are now subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP). This penalty is based on the highest account balance measured over up to eight years.

Under the program, banks are required to:

  • Make a complete disclosure of their cross-border activities;
  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
  • Cooperate in treaty requests for account information;
  • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
  • Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
  • Pay appropriate penalties.

These Banks, Financial Instructions and Foreign Financial Advisors have made substantial efforts to cooperate with the IRS investigation, including by:

  1. facilitating interviews that their Office with employees, including top level executives;
  2. voluntarily producing documents in response to the Office’s requests;
  3. providing, in response to a treaty request, unredacted client files for the U.S. taxpayer-clients who maintained accounts at their Banks or Financial Instruction; and
  4. committing to assist in responding to a treaty request that is expected to result in the production of un-redacted client files for U.S. taxpayer-clients who maintained accounts at these Banks and Financial Instructions and with these Foreign Financial Advisors.

Outside of these banks and financial advisors, the norm within the OVDP remains 27.5%. That is far better than prosecution or much bigger civil penalties. Some taxpayers, including taxpayers with accounts at one of the 145 Foreign Banks and Financial Advisors listed above can opt for the easier and less costly Streamlined program. This list does not impact the Streamlined programs because you must be non-willful to qualify. All of this is part of the June 2014 improvements to the OVDP, which sparked new interest in cleaning up offshore accounts.
1. With roughly 150 Foreign Banks and Financial Advisors cooperating with the DOJ & IRS and
2. FATCA requiring the entire world to report to the IRS
it is INEVITABLE that this increased disclosure, will result in EVERY AMERICAN eventually being discovered. Banks worldwide want to know if there US clients are compliant with the IRS.
Within the OVDP, people who Pre-Cleared
Before the various Effective Dates
are generally Safe From the Higher 50% Penalty.

As additional banks are added to the list, only those American taxpayers that request pre-clearance before their bank is listed, will get the 27 1/2% OVDP penalty. The 50% penalty now applies to all taxpayers with accounts at financial institutions or with facilitators which are named, are cooperating or are identified in a court filing such as a John Doe summons.

Although the 50% penalty is high, willful civil violations can result in tax, penalties and interest totaling 325% of the highest balance in the account for the most recent six years period. Recent guidance suggests that the IRS could be more lenient in the future, but the IRS’s definition of leniency can still make the OVDP a very good deal that provides certainty.

If you are an American with undeclared foreign income, you need to immediately contact Experience International Tax Attorneys, before September 28, 2018!