Offshore Voluntary Disclosure Program

On July 19, 2019, the Internal Revenue Service (IRS) Large Business & International (LB&I) division announced the approval of six new campaigns. As in the past, the IRS stated that “LB&I’s goal is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources.” This brings the total number of campaigns to 59! LB&I’s campaign announcements and approved campaigns are available on the IRS’s website.

The six new LB&I campaigns are listed below, verbatim by title and description.

S Corporations Built in Gains Tax
C corporations that convert to S corporations are subjected to the Built-in Gains tax (BIG) if they have a net unrealized built-in gain and sell assets within 5 years after the conversion. This tax is assessed to the S corporation. LB&I has found that S corporations are not always paying this tax when they sell the C corporation assets after the conversion. LB&I has developed comprehensive technical content for this campaign that will aid revenue agents as they examine the issue. The goal of this campaign is to increase awareness and compliance with the law as supported by several court decisions. Treatment streams for this campaign will be issue-based examinations, soft letters, and outreach to practitioners.
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Lately, we have been frequently asked the question: “I file US tax returns and pay taxes here. Are my cryptocurrency transactions taxable or reportable in the US?”

The answer for US persons and US taxpayers most likely is “yes.” US persons are generally taxable on income earned worldwide, regardless of the manner in which that

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 3 – 7, 2018:

September 4, 2018: The IRS reminded taxpayers that they have until September 28, 2018, to apply for the Offshore Voluntary Disclosure Program.

September 5, 2018: In response to taxpayer inquiries,

On March 13, 2018, the Internal Revenue Service (IRS) announced that it will begin ramping down the current Offshore Voluntary Disclosure Program (OVDP) and urged taxpayers with undisclosed foreign assets to apply for the program prior to its close on September 28, 2018. We have previously reported on developments in the OVDP.

Access the full

On January 23, 2018, President Trump announced his intent to nominate Courtney Dunbar Jones to the US Tax Court. He previously nominated Elizabeth Copeland and Patrick Urda on August 3, 2017.

Courtney Dunbar Jones is a senior attorney in the Tax-Exempt and Government Entities division in the Office of Chief Counsel of the Internal Revenue

On October 30, 2017, Paul Manafort Jr. was indicted for concealing his interests in several foreign bank accounts, as well as tax evasion and a host of other criminal charges.  The indictment reminds us how important it is to follow the strict guidelines of the reporting regime that the Internal Revenue Service (IRS) and the US Department of the Treasury have established to disclose foreign bank accounts.

Pursuant to the Bank Secrecy Act, a US citizen or resident (a US Person) is required to disclose certain foreign bank and financial accounts which he or she has “a financial interest in or signature authority over” annually.  This obligation can be triggered by direct or indirect interests; a US Person is treated as having a financial interest in a foreign account through indirect ownership of more than 50 percent of the voting power or equity of a foreign entity, like a corporation or partnership.  The US Person is required to annually disclose the interest on FinCEN 114, Report of Foreign Bank and Financial Accounts, which is commonly referred to as the FBAR.  The disclosure requirement is triggered when the aggregate value of the foreign account exceeds $10,000.  The form is filed with your federal income tax return.

The civil penalties for failing to timely disclose an interest in a foreign account can be severe, and in the case of willful violations, can reach up to 50 percent of the highest aggregate annual balance of the unreported foreign financial account each year.  The statute of limitations for FBAR violations is six years, and the willful penalty may be assessed for more than one year, creating extreme financial consequences for FBAR reporting failures.


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Wrapping up July—and Looking Forward to August

Tax Controversy Activities in August:

August 7, 2017: Elizabeth Erickson and Kristen Hazel will be representing McDermott Will & Emery at the 2017 US Captive Awards in Burlington, Vermont. McDermott has been shortlisted in the Law Firm category.

August 8, 2017: Tom Jones is presenting an update

The Internal Revenue Service (IRS) currently offers non-compliant US taxpayers several different relief programs to report foreign assets and/or income to become compliant with US rules related to the disclosure of offshore income. See here for a link to the different options. The two main programs are the Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Filing Compliance Procedures (SFCP). The IRS launched the OVDP in 2012 to enable a taxpayer with undisclosed foreign income or assets to settle most potential penalties he may be liable for through a lump sum payment of 27.5 percent of the highest aggregate value of the taxpayer’s undisclosed foreign assets for the voluntary disclosure period, which is the previous eight years. The OVDP replaced prior offshore voluntary disclosure programs and initiatives from 2009 and 2011. OVDP has a number of filing and payment requirements, including paying eight years’ worth of accuracy-based penalties. The IRS updated and revised the OVDP in 2014.
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