IRS Streamlined Disclosure Procedures For Unreported Offshore Accounts (FBAR Requirements)

The multiple iterations of the Offshore Voluntary Disclosure Program (OVDP) helped numerous taxpayers with offshore accounts return to compliance and avoid criminal penalties. The IRS’s intense focus on offshore accounts resulted in more than $6.5 billion in collections, and more than 45,000 taxpayers used the program.

The IRS had reopened the OVDP in 2014 to address strong interest from taxpayers and tax practitioners after the closure of the previous programs. This program had been open without a deadline, but that changed with a September 28, 2018 deadline. New procedures have since gone into effect for the voluntary disclosure program.

At Levins Tax Law, we not only represent clients across Massachusetts, but frequently are requested to provide representation on a national and international level.

Streamlined Domestic And Foreign Offshore Procedures

There are two programs — Streamlined Foreign Offshore Procedures and Streamlined Domestic Offshore Procedures — depending on residency.

Each has slightly different eligibility rules, procedures and penalties. The current iteration extended eligibility to taxpayers residing in the U.S., eliminated a tax threshold and risk assessment process from the 2012 program.

What are some of the eligibility requirements? While the past OVDP was a way to address past willful conduct and avoid criminal liability, you must certify that the failure to file FBARs (FinCEN Form 114) was not willful. Others include:

• No IRS-initiated civil examination of a tax return for the year in question
• A valid Taxpayer Identification Number

For those who may have previously filed delinquent or amended returns to address the situation (often referred to as “quiet disclosures”) can participate, but the IRS will not abate previous penalty assessments.

Tax returns submitted under either program will not result in a closing agreement, but are handled similar to any other return. These returns could be subject to IRS examination, added civil penalties and possible criminal liability.

Find out what potential liabilities exist in using this program versus another strategy from a tax attorney before making a costly mistake. Another consideration is that an assessment of penalties is added into the determination of whether someone qualifies as a significantly delinquent taxpayer under the IRS and State Department joint passport denial program.

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