The IRS has announced the closing of its Offshore Voluntary Disclosure Program (OVDP), effective Sept. 28, 2018. Taxpayers have until then to come forward with previously undisclosed foreign financial assets.
Clients should be encouraged to hire tax attorneys to perform the actual OVDP work even though the CPAs should be engaged to prepare the returns under the program. This helps prevent unauthorized practice of law by CPAs and, if a Kovel agreement is in place, may help preserve the attorney-client privilege.
Despite the closure of ODVP, the Streamlined Filing Compliance Procedures (SFCP) will remain in place for eligible taxpayers previously unaware of their filing obligations. The IRS has advised that SFCP may close at some point too.
However, the IRS indicates that stopping offshore tax noncompliance remains a top priority.
Under current law, U.S. taxpayers are obligated to report certain offshore assets. Each “U.S. person” with an interest in, signature or other authority over, and/or one or more bank, securities or other financial accounts in any foreign country must file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of these combined accounts exceeds $10,000 at any point during a calendar year. (Some exceptions apply.) The Foreign Account Tax Compliance Act (FATCA) includes additional filing requirements. Failure to comply with FATCA or file an FBAR can result in civil penalties, criminal penalties or both.