The Large Business and International division of the IRS has restructured its approach to examinations. Yesterday, it released its list of 13 focus areas for issue- based examinations and concerns for compliance. One of those areas involves the IRS Offshore Voluntary Disclosure Program. Entitled, "OVDP Declines-Withdrawals Campaign," this area of focus involves taxpayers who have applied for the offshore voluntary disclosure program through the pre-clearance process, but were either denied access to the program or withdrew from the program.
What happens next? "The IRS will address continued noncompliance through a variety of treatment streams including examination." Examining those taxpayers who could not enter the program, because they are under civil audit, criminal investigation, or the IRS is otherwise aware of the account(s) at issue in the disclosure, is expected. Further, those who violated the law intentionally might expect a criminal tax investigation or possible referral for prosecution, depending on the circumstances and reasons for denial into the program.
We have seen an uptick in audits and FBAR inquiries associated with taxpayers who have not come forward, and certainly anyone who opts-out of the OVDP program is subject to an immediate audit of their tax returns and FBAR filings. "Making this effort a 'campaign' certainly raises the awareness of the programs and need to quickly come into compliance and assures that resources are available to support the audits and other investigations," says Jim Mastracchio, Co-Chair of Dentons National Tax Controversy Practice.
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