The American Institute of CPAs recommended the Treasury Department and the Internal Revenue Service make a number of changes to improve the Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures that allow U.S. taxpayers to voluntarily disclose previously unreported offshore assets and comply with U.S. tax laws.
“The remarkable success of these programs is greatly attributable to their fairness and the absence of unnecessarily punitive penalties on those taxpayers eligible to participate,” AICPA Tax Executive Committee chair Troy L. Lewis wrote in a letter Wednesday to top Treasury and IRS officials. “The AICPA believes that making certain minor revisions to the terms of the 2014 Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures would both increase the number of taxpayers participating and improve the fairness and equity of the programs.”
For the OVDP, the AICPA recommended that the IRS restore the previous practice of not requiring an upfront payment of the miscellaneous offshore penalty by taxpayers. The IRS should also apply the 50 percent miscellaneous “super” penalty only to accounts held at institutions listed on the Foreign Financial Facilitators List, the AICPA suggested, and it should permit the waiver of the passive foreign investment company computations for small account cases.
For the Streamlined Filing Compliance Procedures, the AICPA recommended the IRS modify the penalty base to include only those assets associated with tax non-compliance, and expand the Streamlined Filing Compliance Procedures to include certain classes of non-willful individuals who are currently ineligible for either the Streamlined Foreign Offshore Procedures (SFOP) or the Streamlined Domestic Offshore Procedures (SDOP), as well as provide additional guidance in the SFOP and SDOP filing instructions for taxpayers on the specific factors the IRS will consider in judging whether their non-compliance was willful.
Lewis provided a detailed description in the letter of each of the Institute’s six recommendations, along with the AICPA’s rationale for supporting them.