The Internal Revenue Service has modified two of its offshore voluntary compliance programs to help more taxpayers come into compliance with their U.S. tax obligations.

Streamlined Procedures Expanded

The changes announced include expanded streamlined procedures now available to a wider population of U.S. taxpayers living abroad and, for the first time, to certain U.S. taxpayers residing in the country. The changes include:

  • The requirement that the taxpayer have $1,500 or less of unpaid tax per year has been eliminated
  • The risk questionnaire has been eliminated
  • The taxpayer is now required to certify that previous failures to comply were due to non-willful conduct

Under the streamlined procedures, all penalties will be waived for eligible U.S. taxpayers residing abroad. Eligible U.S. taxpayers residing in the country will only receive a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets not in compliance.

Offshore Voluntary Disclosure Program Modified

The changes also include modifications to the Offshore Voluntary Disclosure Program (OVDP). The changes include:

  • Additional information from taxpayers applying to the program is not required
  • The existing reduced penalty percentage for certain non-willful taxpayers has been eliminated
  • Taxpayers are now required to submit all account statements and pay the offshore penalty at the time of the OVDP application
  • Taxpayers may now submit records electronically
  • The offshore penalty percentage has increased from 27.5 percent to 50 percent if, before the taxpayer’s OVDP pre-clearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or Department of Justice

For assistance navigating these changes, contact Doeren Mayhew‘s tax advisors in Michigan, Houston or Ft. Lauderdale.