IRS Amnesty Timeline of Tax Amnesty Programs
IRS Amnesty: When a U.S. Person is out of compliance for not disclosing U.S. or foreign income, assets, accounts or investments to the Internal Revenue Service, they may be subject to significant offshore and domestic fines and penalties. While the IRS has shifted primary focus to offshore compliance, the service is just as willing to penalize you for non-compliance of domestic tax issues as well. When a Taxpayer wants to voluntarily comply with the Internal Revenue Service before they are contacted by the IRS, they may qualify for Tax Amnesty. There are various amnesty or “voluntary disclosure” programs available.
We will briefly summarize the history, along with the current available options.
“Traditional” Voluntary Disclosure
Traditional Voluntary Disclosure has been around for many years (before offshore compliance became a key enforcement priority).
It is used for taxpayers who were willful or non-willful and had either Domestic or Offshore Income (or both). It has become much more popular following the close of OVDP (see below).
2009 OVDI and OVDP
In 2009 the OVDI/OVDP program was introduced.
OVDI (Offshore Voluntary Disclosure Initiative)
OVDI was introduced at around the same time Swiss Banks were entering into deferred prosecution agreements.
It was used to help taxpayers voluntarily get into compliance. There were set penalty standards to help taxpayers calculate their exact penalty. The penalties were less than the standard FBAR penalty.
OVDP (Offshore Voluntary Disclosure Program)
In 2011/2012, OVDI was morphed into OVDP.
The OVDP program was nearly the same as OVDI, with some additional procedures for taxpayers made available.
As more countries began cooperating with the U.S., coupled with the introduction of FATCA (Foreign Account Tax Compliance Act), the program grew and became more popular.
What if I Was Non-Willful?
There was no stand-alone program for non-willful taxpayers.
Rather, the taxpayer would have to opt-out and risk a smaller penalty against a larger penalty.
The Opt-Out process was timely and costly for the client.
2014 Streamlined Filing Compliance Procedures (SFCP, SDOP & SFOP)
In 2014, the Streamlined Procedure was introduced.
The technical name is the Streamlined Filing Compliance Procedures.
There are two versions of the program:
The Streamlined Programs were a welcome relief for non-willful taxpayers.
It helped taxpayers limit their exposure. The offshore penalties were significant reduced and in some cases, completely eliminated.
The IRS also reduced the number of amended returns required to be filed by the Taxpayers (aka compliance period).
Following the introduction of Streamlined Procedures, the OVDP was used by two main categories of Taxpayers:
- Taxpayers who were willful and were concerned about criminal exposure (or could not certify under penalty of perjury they were non-willful); and
- Taxpayers who wanted to avoid an audit
In addition the IRS clarifies that the Delinquency Procedures may still be used.
This means that a Taxpayer may opt for Delinquency in lieu of OVDP or Streamlined.
*There are pros and cons to selecting delinquency over the streamlined or OVDP/VDP which a taxpayer must consider before making the submission.
2018 & the End of OVDP
On September 28, 2018, the IRS closed OVDP.
With OVDP ending, What’s a willful taxpayer to do?
Streamlined is not an option. If you are willful and go streamlined, you risk Federal Prosecution.
2018/2019 IRS Expanded “Traditional Voluntary Disclosure”
In November of 2018, the IRS expanded the traditional voluntary disclosure program, and it continues to morph.
The updated practice provides various procedures for submission and a standard “preclearance letter.”
Under the new version of the program, the penalty scheme varies.
In some cases of the better, and in some cases for the worse.
2020 Voluntary Disclosure Options
Currently, there are the following voluntary disclosure programs available:
- VDP (Voluntary Disclosure Program)
- SDOP (Streamlined Domestic Offshore Procedures)
- SFOP (Streamlined Foreign Offshore Procedures)
- DIIRSP (Delinquent International Information Return Submission Procedures)
- RC (Reasonable Cause)
We Specialize in Streamlined & Offshore Voluntary Disclosure
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Our lead attorney is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about our Firm?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
We specialize in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
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