End to OVDP
As we approach the end of the month, one more important date is looming for many US citizens who are deemed “wilful in their failure to file tax returns”, the end of OVDP (Offshore Voluntary Disclosure Program).
The OVDP program closes completely on 28th September 2018.
OVDP was introduced in 2009, and revised in 2014. In brief, OVDP was a form of amnesty program designed to allow taxpayers who could not be considered “unwilful” (ie did not intentionally fail to file their returns) to come back into the fold, with a prescribed penalty regime. For many, this offered an opportunity to come forward regarding international bank accounts, investments or similar, with a reduced risk of criminal prosecution.
For the last 9 years, this has proved an incredibly successful, netting over $11b in additional tax revenues for the IRS (according to the most recent statistics available).
It is a common misconception that OVDP is ending as the IRS is no longer focusing on international taxation. This is untrue, and the reality is quite the opposite. The IRS has established multiple international tax enforcement groups, and the amount of penalties issued for unreported entities or accounts (trusts etc.) is rising.
The IRS introduced OVDP as a voluntary program, as the agency didn’t previously have the ability to track the foreign assets and accounts held by individuals at the time. This is no longer the case, and the IRS no longer needs a voluntary disclosure program, but rather can use the instruments built as part of FATCA to catch up with any individuals it deems to be failing to comply.
Luckily, few New Zealand or Australian based US citizens have needed to use the OVDP program, instead using the Streamlined Filing Program, which is far less punitive and designed for “non-wilful” individuals. Rather than the severe penalty regime of OVDP, Streamlined instead waives all penalties for taxpayers who were not aware of the need to file returns to the IRS, and thus unintentionally failed to comply.
Now is the time for any US citizen with any worldwide income to take advantage of the amnesty programs available, and come into compliance without penalty. OVDP is the first to go, don’t leave it too late, Streamlined may be next.