This alert concerns taxpayers with undisclosed foreign financial accounts and undisclosed foreign assets, as well as taxpayers participating in the Internal Revenue Service's Offshore Voluntary Disclosure Program (OVDP) or Streamlined Filing Compliance Procedures (Streamlined).
On June 18, the IRS introduced significant changes to both OVDP and Streamlined. These changes again increase the volume and breadth of information requested by the IRS within OVDP and increase the penalties payable under OVDP in certain cases. The changes also, however, broaden the availability of Streamlined, especially for U.S.-resident taxpayers, and permit those already in OVDP who qualify for Streamlined to apply the Streamlined penalty to their OVDP matters instead of incurring the OVDP penalty in certain cases.
Changes to the Programs
Many taxpayers and practitioners believed that the OVDP 27.5 percent penalty on the total value of undisclosed foreign assets was too expensive for U.S.-resident taxpayers whose failures to disclose offshore accounts or assets were not due to willful tax avoidance. To address this and other issues, the IRS has expanded the availability of the Streamlined program, including for the first time making it available to U.S.-resident taxpayers, albeit with a small penalty.
Applying the Streamlined Penalty Instead of the OVDP Penalty in Certain OVDP Cases
Since the changes to Streamlined have opened that program to U.S.-resident taxpayers, the IRS has made it possible for taxpayers already in OVDP to pay the Streamlined penalty instead of the OVDP penalty if their conduct was non-willful. To take advantage of this penalty reduction, the taxpayer must have submitted the Offshore Voluntary Disclosure Letter by July 1. (A taxpayer who has not done so may still opt out of OVDP and simply apply for Streamlined.)
The taxpayer must still complete and file all documents required by OVDP and pay all tax, penalties, and interest required by OVDP, except for the 27.5 percent OVDP penalty, by the applicable OVDP deadline. The taxpayer must also sign a more detailed version of the Streamlined non-willfulness certification under penalty of perjury. If the certification is accepted, the taxpayer will have to pay the 5 percent Streamlined penalty in lieu of the 27.5 percent OVDP penalty.
Aaron Kriss was a featured panelist in a webinar, "Form 3520 Foreign Trust Reporting for Tax Counsel: Navigating Filing Requirements and Penalty Abatements for Delinquencies," for Strafford Publications.
Warren Whitaker will be Program Chair of the 13th Annual International Estate Planning Institute at the Crowne Plaza Hotel in New York, NY.
Warren Whitaker was a featured speaker at an event called "CLE - Cross-Border Estate Planning," which was sponsored by the Trusts & Estates Section of the Boston Bar Association.
Tina Albright was a featured panelist at an international forum uniting the most senior and elite legal advisers to HNWs and UHNWs.
Dina Kapur Sanna wrote a chapter entitled "Reporting Requirements for Foreign Trusts" which will be published in the February 2017 issue of the ALI CLE Estate Planning Course Materials Journal.
Von Sanborn was featured in an article, "Five Questions: Von Sanborn on Art Law, Insurance and the IRS," published in the Connecticut Law Tribune.
Day Pitney LLP was mentioned in an article, "Day Pitney Named Law Firm of the Year by Family Wealth Report," in the Hartford Business Journal.
Day Pitney LLP was named 'Law Firm of the Year' by Family Wealth Report at its 2017 Awards Ceremony at the Mandarin Oriental Hotel in New York City.
Tina Albright was mentioned in an article, "On the Move," in the New York Law Journal. Albright recently joined Day Pitney as a partner in its Trusts and Estates practice.