IRS to Ramp Up Criminal Prosecution to Combat Offshore Tax Avoidance
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IRS to Ramp Up Criminal Prosecution to Combat Offshore Tax Avoidance

The Internal Revenue Service (IRS) announced that the Offshore Voluntary Disclosure Program (OVDP) will be closing on September 28, 2018. However, that does not mean that the IRS is no longer making offshore tax avoidance a top enforcement priority.

According to the IRS, the OVDP has simply outlived its usefulness. It appears that the program, which began in 2009, only attracted 56,000 taxpayers who used one of its programs to comply voluntarily. The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number steadily declined through the years. Indeed, they were only 600 disclosures in 2017. This is an underwhelming number of taxpayers. What does that mean?

Going forward, the IRS plans to rely on other options in its toolbox, including taxpayer education, whistleblower leads, civil examination and criminal prosecution. As the agency explained in its announcement regarding the termination of the OVDP:  

Stopping offshore tax noncompliance and evasion remain top priorities of the IRS. The IRS enforces offshore compliance with tax and FBAR requirements using information received under the Foreign Account Tax Compliance Act (FATCA), the network of intergovernmental agreements between the U.S. and partner jurisdictions, automatic third-party account reporting, and other data-rich sources such as the Department of Justice’s Swiss Bank Program and various John Doe Summonses. The IRS leverages information resources using enhanced data analytics to continue to make it more difficult to evade tax by hiding offshore. 

Since 2009, the IRS criminal investigation unit has investigated 1,545 taxpayers on criminal violations related to international activities, of which 671 were indicted on international criminal tax violations.

Message To Taxpayer

In shuttering the OVDP, the IRS is now sending a clear signal that rather than relying on the voluntary disclosure program it will increase criminal prosecutions to effect compliance. Those who have not complied should heed this warning and file a disclosure before the deadline or otherwise face criminal prosecution. To find out how we can help, contact Scarinci Hollenbeck’s experienced tax attorneys.


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AboutFrank L. Brunetti

Frank Brunetti has been practicing law for over thirty years in the areas of estate and wealth preservation, tax planning for business entities and complex tax matters. He is admitted to the New Jersey and New York Bars as well as the United States Tax Court.Full Biography

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IRS to Ramp Up Criminal Prosecution to Combat Offshore Tax Avoidance

IRS to Ramp Up Criminal Prosecution to Combat Offshore Tax Avoidance
Author: Frank L. Brunetti

According to the IRS, the OVDP has simply outlived its usefulness. It appears that the program, which began in 2009, only attracted 56,000 taxpayers who used one of its programs to comply voluntarily. The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number steadily declined through the years. Indeed, they were only 600 disclosures in 2017. This is an underwhelming number of taxpayers. What does that mean?

Going forward, the IRS plans to rely on other options in its toolbox, including taxpayer education, whistleblower leads, civil examination and criminal prosecution. As the agency explained in its announcement regarding the termination of the OVDP:  

Stopping offshore tax noncompliance and evasion remain top priorities of the IRS. The IRS enforces offshore compliance with tax and FBAR requirements using information received under the Foreign Account Tax Compliance Act (FATCA), the network of intergovernmental agreements between the U.S. and partner jurisdictions, automatic third-party account reporting, and other data-rich sources such as the Department of Justice’s Swiss Bank Program and various John Doe Summonses. The IRS leverages information resources using enhanced data analytics to continue to make it more difficult to evade tax by hiding offshore. 

Since 2009, the IRS criminal investigation unit has investigated 1,545 taxpayers on criminal violations related to international activities, of which 671 were indicted on international criminal tax violations.

Message To Taxpayer

In shuttering the OVDP, the IRS is now sending a clear signal that rather than relying on the voluntary disclosure program it will increase criminal prosecutions to effect compliance. Those who have not complied should heed this warning and file a disclosure before the deadline or otherwise face criminal prosecution. To find out how we can help, contact Scarinci Hollenbeck’s experienced tax attorneys.