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.
On June 7, Tina Albright will be speaking on a panel, "Family Office & Next Gen Planning," at the Transcontinental Trusts International Forum in Bermuda.
Dina Kapur Sanna will be speaking on two panels at International Estate & Tax Planning 2019, a conference presented by the Practising Law Institute and held in New York, NY.
Carl Merino spoke on a panel, "Non-Residents Acquiring Real Estate: Compare & Contrast Between the U.S. & UK," at the U.S.-UK Tax Planning conference, presented by KNect365 and held in New York, NY.
Carl Merino authored an international practice feature article, "U.S. Owners of Foreign Corporations Face New Hurdles," published in the April 2019 issue of Trusts & Estates magazine.
Day Pitney Alert
Day Pitney's Family Office practice has been selected as a finalist in the Family Offices—Client Initiative category of the 2019 Wealth Management.com Industry Awards for the Day Pitney Family Office Investing SeriesTM.
Day Pitney Press Release
Tina Albright and Rebecca Tunney were quoted in an article, "USA Update: Engaging Women in Wealth Management," published by Citywealth.
Day Pitney attorneys Tina Albright and Rebecca Tunney have been shortlisted for "Best Female Advisors & Managers in the USA" for New York and Boston, respectively, as part of the U.S. Powerwomen Awards by Citywealth.
Von Sanborn was featured in an article, "Tax Screw-Ups and People Problems: Experts Reveal Biggest Blunders of Rich Families," published by Bloomberg.