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Words of advice as overseas tax disclosure program winds down

We commented on a major IRS announcement in a recent blog post, noting in our March 20 entry that the agency’s Offshore Voluntary Disclosure Program launched back in 2009 will officially terminate on September 28 of this year. We stressed that many Americans holding offshore assets might reasonably “be buoyed” by that news.

A former high-ranking member of the U.S. Department of Justice doesn’t necessarily think that should be the case. In fact, notes ex DOJ Tax Division chief Caroline Ciraolo, many taxpayers – and, indeed, nonpayers – might find that what follows in the wake of the OVDP’s cessation “is not nearly as palatable as what we have now.”

Many filers have grown complacent over time, especially those who have duly noted the program’s multiple extensions and successive IRS warnings that did not result in personal problems. Some of those individuals likely view the OVDP’s upcoming demise as an indication that the IRS is winding down its close scrutiny and follow through on select taxpayers.

That is not an optimal way to think, cautions Ciraolo. Her stated take on the agency’s recent termination announcement is that it should serve as “a wake-up call” and even a warning sign that tougher – not weaker and more liberalized – sanctions are forthcoming for people identified as tax evaders.

The years of OVDP operation enabled the IRS to collect massive amounts of data on individuals with undisclosed foreign holdings, says Ciraolo. The agency will be poised to use that information in enforcement efforts later this year, she asserts, being “less inclined [not more apt] to offer a sweet deal to non-compliant taxpayers.”

Ciraolo’s advice for worried filers is this: Take advantage of the program’s forgiveness features before they expire, even if doing so will bring some pain.

An estate administration attorney who is also a licensed CPA tax professional can provide further information and guidance regarding the OVDP program and related subject matter.

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