The IRS announced on June 26 that is has now collected more than $5 billion in revenue from its offshore voluntary disclosure program (OVDP), which seeks compliance from individuals who had not previously reported offshore accounts. The OVDP first launched in 2009 for a limited period of time, was reopened in 2011 and then, following strong ongoing interest, opened a third time in 2012. More than 30,000 disclosures were made in 2009 and 2011, with an additional 1,500 made this year.
Individuals who enter the program face less severe penalties from the IRS than what could be assessed under current law. The program is not “cheap” however as the standard FBAR penalty is 27.5% of the highest combined value of all offshore accounts going back as far as 2003. The program also requires taxpayers to file original and/or amended tax returns and pay back taxes, interest and any related delinquency penalties as far back as 2003.
The IRS also makes it clear it continues to seek offshore accounts owned by U.S. taxpayers for which no tax filings exist and reiterates the consequences for individuals who do not voluntarily disclose information. One benefit of the 2012 program, which is unlike that of the two previous programs, is that there is no program deadline. But the IRS has warned that program conditions may change at any time or the program may end at any time, thereby urging immediate participation. One example of this is that on June 26th the IRS announced that U.S. taxpayers who ask foreign governments not to disclose tax-related information regarding their offshore accounts must inform the U.S. Department of Justice of this request or lose the opportunity to be eligible for the OVDP.