The Internal Revenue Service announced this week that it will close the 2014 Offshore Voluntary Disclosure Program on Sept. 28.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” the agency’s acting commissioner, David Kautter, said in a statement. “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 IRS said it would continue to use other methods to combat offshore tax avoidance, including taxpayer education, whistleblower leads, civil examination and criminal prosecution.
The IRS said a separate program, the Streamlined Filing Compliance Procedures, would remain in place and available to eligible taxpayers, though it too may end at some point.
This program, which is for taxpayers who might not have been aware of their filing obligations, has helped some 65,000 taxpayers come into compliance, the IRS said.
Shannon Retzke Smith, a partner in the Withers Bergman law firm, said in a telephone interview that the self-reporting OVDP is a low-cost program for the government, as the offending taxpayer conducts a self-audit and computes the penalty. The government’s more hands-on tools will be a “waste of taxpayer money.”
Smith noted that the closure of the voluntary disclosure program will leave two groups of taxpayers who will not qualify for the streamlined program out in the cold. One group is those who criminally stashed money overseas, but now want to come clean and pay the IRS what they owe.
The other group comprises taxpayers who want closure, but may not qualify or may be willing to take the risk inherent in the streamlined program. For example, someone may claim that he or she was not aware of the requirement to disclose foreign accounts and who indicated on Schedule B incorrectly not owning a foreign account — perhaps having failed to review a tax return before filing. But how to prove this non-willfulness?