International Tax: Offshore Compliance

The Bank Secrecy Act of 1970 includes a requirement to report foreign financial accounts. This requirement is fulfilled by filing a FBAR. For many years this legal requirement was ignored by the government and practitioners with the result being many uninformed taxpayers. The IRS was delegated authority to enforce the FBAR requirement and aggressively started enforcement around 2003. The Foreign Account Tax Compliance Act (FATCA) enacted in March 2010 substantially increased awareness of the FBAR requirement and brought the realization to many taxpayers that they may not be able to keep foreign financial accounts secret much longer.

 

The IRS has implemented the Offshore Voluntary Disclosure Program, now in its fourth revision, in order for U.S. taxpayers to come into compliance with their delinquent filings while minimizing penalties and the potential for criminal investigations. However, the IRS recently announced the 2014 Offshore Voluntary Disclosure Program will officially end on September 28, 2018.

  • 2009, 2011, 2012 and 2014 Voluntary Disclosures – The IRS implemented offshore voluntary disclosure programs aimed at bringing taxpayers with offshore income from offshore accounts into compliance. These programs are a hybrid of the IRS’ longstanding voluntary disclosure procedures.  On March 13, 2018, the IRS released IR-2018-52, announcing the end of the Offshore Voluntary Disclosure Program on September 28, 2018.

  • Streamlined Filing Compliance Procedures – In June of 2014, the IRS announced changes to its Streamlined Filing Compliance Procedures significantly expanding the scope of individuals eligible to make a “Streamlined Disclosure.” The advantage of the Streamlined Disclosure, for those who can certify that their non-compliance with tax and FBAR rules was non-willful, is a lower penalty percentage than that under the OVDP, a shorter disclosure period requiring fewer amended returns and FBARs. Although the Offshore Voluntary Disclosure Program is ending, the IRS has advised that the Streamlined Filing Compliance Procedures will remain in effect, but can be terminated at any time. ​

  • Post-Offshore Voluntary Disclosure –Taxpayers may face a number of issues subsequent to filing a voluntary disclosure whether it is through the Offshore Voluntary Disclosure Program, Streamlined Filing Compliance Procedures, or a voluntary disclosure outside of those programs. Our international tax attorneys at Mopsick Carrere, LLP are available to assist in navigating those difficult issues.