Foreign Nationals & Expats
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IRS to Audit OVDP Opt Out Cases
What’s new for 2017 IRS OVDP?
Each year the IRS rolls out campaigns to identify the the top compliance issues for the year. For each of these campaigns, the IRS will deploy resources, training, and tools, metrics and feedback to enforce compliance in these areas. One of the selected campaigns for 2017 involves the IRS OVDP program.
IRS OVDP Audit Campaign
This campaign will be lead by IRS executive Pamela Drenthe, Director of the International Individual Compliance Practice Area.
Who does this OVDP audit campaign affect?
This campaign addresses applicants who applied for OVDP or requested pre-clearance but either were denied access or withdrew from the program voluntarily.
What will happen if I am in one of the above categories?
If you were rejected from the OVDP program or voluntarily withdrew from the program, the “IRS will address any continued noncompliance through a variety of treatment streams including examination.” (emphasis added)
What should I do if I am potentially affected by this campaign?
If you’re not in compliance, you should immediately hire a legal representative and try to resolve your non-compliance through one of the offshore programs currently available. If your OVDP application was rejected, you’ll need to determine why you received the rejection letter. Voluntary disclosure requires the applicant to truthfully, timely, and completely comply with all provisions of the voluntary disclosure practice. If your application or pre-clearance was rejected, it’s likely due to one of the following reasons:
The application or pre-clearance request was not complete: This is easier to cure. You and your legal representative should determine what information was missing and resubmit.
The application or pre-clearance request was not timely: A request is not timely if the IRS has a pending civil or criminal investigation against you, notified you that it intends to conduct a civil or criminal investigation, or has received information from a 3rd party informing the IRS of your non-compliance. If your application or pre-clearance request was denied for one of these reasons, you’re potentially in a very bad situation. Your legal representative needs to contact the IRS Criminal Investigation Department to determine exactly why the application was denied.
Here are the two key takeaways from this recent focus on rejected and withdrawn OVDP cases:
1. If you decide to apply for pre-clearance or full OVDP, don’t expect to be able to withdraw without potential complications. Withdrawing from the program clearly puts yourself “on the radar” for a potential examination.
2. If your pre-clearance or OVDP application is rejected, find out exactly why and if necessary have your legal representative begin engaging in discussion with the IRS. “Laying low’ and doing nothing is probably the worst thing you can do because the consequences of continued non-compliance will be severe.
The fear of rejection from the OVDP program or pre-clearance should not dissuade anyone from applying when their conduct shows obvious signs of willfulness. In many cases where OVDP applications have been rejected, the IRS has considered a failed entry into the OVDP program to be a mitigating factor in favoring a lesser fine and probation rather than incarceration.
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“Large Business and International Launches Compliance Campaigns.” Internal Revenue Service, 28-Feb-2017, https://www.irs.gov/businesses/large-business-and-international-launches-compliance-campaigns
United States v. Tenzer, 213 F.3d 34, 42-43 (2d Cir. 2000) (treating as mitigating a defendant’s failed attempt to enter an IRS voluntary disclosure program).
United States v. Zabczuk, 10-60112 (S.D. Fla.) (defendant’s OVDP was rejected and received three years’ probation despite the government’s request for an 18-month sentence).