With the current OVDP program ending in September, many taxpayers are either wondering what’s next, or just now realizing they have international reporting requirements and that they may have already missed their opportunity. Furthermore, even though the IRS has closed and reopened the program several times over the years, all indications are that due to the information gained through FATCA we are unlikely to see another installment of the OVDP.
Nevertheless, for taxpayers that have not yet met their reporting obligations there are still options. First, the traditional domestic voluntary disclosure program is still available. This may allow taxpayers with serious violations to avoid criminal charges if the requirements are met. However, there is not as much certainty as to the potential penalties as opposed to OVDP, and the rules are different, such as, the income being reported cannot be from illegal sources. Taxpayers who feel they have criminal exposure should take a serious look at using this program.
Next, the streamlined program remains open. The IRS has stated that the program will eventually be closed as well, but for now taxpayers can still make a streamlined filing. This program remains an incredible option for taxpayers that qualify and for certain taxpayers can sometimes erase years of noncompliance without even paying a penalty. The delinquent FBAR and delinquent informational reporting procedures remain open as well. The scope of these procedures is somewhat narrow, but without OVDP, sometimes they can be used as a supplement to a compliance plan to at least partially mitigate penalties.
Lastly, all the long time options of compliance can be used – amended returns, reasonable cause, etc. In our dealings with the IRS, and in hearing IRS employees speak at presentations, there are two things that are clear. Even without the OVDP the IRS still expects everyone who knows they are noncompliant to take the necessary measures to remedy the filing problems. Also, if taxpayers are open, honest, and use the best method possible for compliance, the IRS will view them more favorably than people who do not make this effort. Most importantly, the information obtained through FATCA and data mining is going to allow the IRS to have success finding noncompliant taxpayers.
Overall, the takeaway should be that there are still options for compliance, and even if they are not perfect, the time may be short for taxpayers to come to the IRS before they come to them.