June 25, 2014

Kinder, Gentler IRS’ Finally Arrives at the Doorstep of the Offshore Voluntary Disclosure Program. Or Does It?

Kinder, Gentler IRS’ Finally Arrives at the Doorstep of the Offshore Voluntary Disclosure Program. Or Does It? Tax & Business

Not since Congress demanded a ‘kinder gentler IRS’ in 1998, has the individual owner of bank accounts and other financial assets maintained outside the US, seen that side of the Internal Revenue Service.

For many, both inside and outside the current structure of the Offshore Voluntary Disclosure Program[s], that became a reality on June 18th.  Well, sort of, – but that is often the way with the IRS.

The KINDER news:

  • A significantly expanded ‘streamlined filing compliance’ procedures for non-filers residing outside the US; and for the first time, acceptance into the streamlined program for those residing inside the US. Penalties eliminated for those residing outside the US and 5% for those residing domestically.
  • Existing reduced penalties for ‘non-willful’ taxpayers will be eliminated.
  • Elimination of the one-size-fits all approach to encourage those ‘non-willful’ taxpayers easier paths to compliance within the program.

The not so GENTLER news:

  • A widening of the 50% penalty for ‘willful’ non-filers, as well as an imposition of the 50% penalty where IRS or DOJ has already begun an investigation.
  • A significant increase in the information required of taxpayers applying to the program.
  • Payment of the offshore penalty at the time of the application.


  • JUNE 30, 2014 is a critical date! Under the many layers of ‘transitional rules’ those taxpayers currently participating in the 2012 or Prior Offshore Voluntary Disclosure Program have documents due no later than June 30.
  • AUGUST 3, 2014 is also a critical date!  Non-filers have to come forward and be subject to the existing 27.5% penalty if their financial institution has been publicly identified as under investigation or cooperating in an investigation.  After that date, the penalty will be 50%.

The REALLY BAD news:

  • The IRS gets your name on a list of overseas account owners before you come forward with a voluntary disclosure; you are open to criminal prosecution in addition to the civil penalties above.


  • There are now 3 full sets of FAQ’s [Frequently Asked Questions], some spanning over 20 pages, for compliance with just the Overseas Voluntary Disclosure Program [OVDP].
  • There are 4 distinct programs and options to choose from each with its own sets of rules, compliance provisions and FAQ’s.

Your Marcum LLP professional can assist you with understanding the IRS programs based on your particular facts and circumstances.

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