On 29 November 2018, the IRS released a memorandum with new procedures for all voluntary disclosures following the end of the Offshore Voluntary Disclosure Program (OVDP) on 28 September 2018. The new Voluntary Disclosure Program (VCP) will now apply to all voluntary disclosures, both domestic and offshore, submitted after 28 September 2018. In addition, the IRS may apply the VCP guidelines to unresolved domestic voluntary disclosures submitted on or before that date.
The new procedures continue to provide taxpayers an ability to come into tax compliance and generally eliminate the risk of criminal prosecution, but there are many changes from the prior OVDP. Some of the changes are logistical changes, such as the timing of submission of the required tax returns and additional documents. Other changes are more substantive including changes to the disclosure period and the penalties imposed.
The VCP covers a six-year disclosure period (shorter than the eight-year OVDP period) but allows a taxpayer to expand the disclosure period if desired. A new featur is that those who cannot reach an agreement on taxes and penalties have the right to appeal the results of the examination with the IRS Office of Appeals. The VCP penalty regime differs from both the OVDP and the longstanding Voluntary Disclosure Program and, although the penalty regime is more uncertain and in most cases potentially more severe than in the OVDP, the IRS makes clear that the VCP is geared toward taxpayers with possible criminal exposure and, for many in that category that is its primary benefit.
Noncompliant U.S. taxpayers should consult with their tax advisors to calculate their maximum tax, interest, and penalty exposure under the new procedures and determine whether filing a voluntary disclosure is appropriate or other options should be considered.
If you believe the above measures may impact your business or require any advice with respect to US taxation, please contact Peter Baum at firstname.lastname@example.org or call +1 914 341 7088.