Transition Rules: Frequently Asked Questions (FAQs)
|1.||What is the purpose of transitional treatment under OVDP?||Transitional treatment under OVDP will allow taxpayers currently participating in OVDP who meet the eligibility requirements for the expanded Streamlined Filing Compliance Procedures announced on June 18, 2014, an opportunity to remain in the OVDP while taking advantage of the favorable penalty structure of the expanded streamlined procedures. The FAQs in this section explain when and how a taxpayer participating in OVDP can seek the favorable penalty structure of the expanded streamlined procedures.|
|2.||When am I considered to be currently participating in an OVDP for purposes of receiving transitional treatment?||
A taxpayer will be considered to be currently participating in an OVDP for purposes of receiving transitional treatment if:
A taxpayer who, as of July 1, 2014, has completed the OVDP certification process where a Form 906 Closing Agreement has been fully executed by the IRS will not be considered currently participating in an OVDP and thus will not be eligible for transitional treatment.
|3.||What if I made a request for OVDP pre-clearance before July 1, 2014, but not a full voluntary disclosure?||A taxpayer will not be considered to be currently participating in OVDP for purposes of receiving transitional treatment unless, as of July 1, 2014, he has mailed to IRS Criminal Investigation his voluntary disclosure letter and attachments as described in OVDP FAQ 24. Thus, a taxpayer who makes an offshore voluntary disclosure as outlined in FAQ 24 on or after July 1, 2014 will not be eligible for transitional treatment under OVDP, even though he may have made a request for OVDP pre-clearance before July 1, 2014.|
|4.||What if I submitted my offshore voluntary disclosure prior to July 1, 2014, but my case was removed from OVDP by the IRS?||A taxpayer whose case has been removed from OVDP by the IRS is no longer participating in OVDP and thus is not eligible for the transitional treatment described in these FAQs.|
|5.||What will be my results if I seek and receive transitional treatment?||Upon IRS approval, taxpayers currently participating in OVDP who meet the eligibility requirements of the Streamlined Foreign Offshore Procedures will not be required to pay the Title 26 miscellaneous offshore penalty prescribed under OVDP. Upon IRS approval, taxpayers currently participating in OVDP who meet the eligibility requirements of the Streamlined Domestic Offshore Procedures will not be required to pay the Title 26 miscellaneous offshore penalty at the OVDP rate to continue participation in OVDP, but will instead be subject the miscellaneous offshore penalty terms of the Streamlined Domestic Offshore Procedures.|
|6.||What steps must I take to seek transitional treatment?||
You are not required to opt out of the OVDP to receive transitional treatment, but you must provide to the IRS:
a. if not already submitted, all submission documents required under the voluntary disclosure program in which you are currently participating (submission documents for each OVDP can be accessed here as follows: 2009 OVDP, 2011 OVDI, and 2012 OVDP);
b.a written statement in the appropriate certification form that would be required under the Streamlined Filing Compliance Procedures signed under penalty of perjury certifying their non-willfulness with respect to all foreign activities/assets, specifically describing the reasons for the failure to report all income, pay all tax, and submit all required information returns, including FBARs, and, if the taxpayer relied on a professional advisor, including the name, address, and telephone number of the advisor and a summary of the advice; and
c. full payment of tax, interest, and any accuracy-related, failure-to-file, and/or failure-to-pay penalties that would be due under OVDP, if not already made.
This information must be provided to the IRS as follows:
Internal Revenue Service
|7.||Is transitional treatment automatic?||No. Before transitional treatment is given, the IRS must agree that the taxpayer is eligible for transitional treatment and must agree that the available information is consistent with the taxpayer’s certification of non-willful conduct.|
|8.||How will my request for transitional treatment be evaluated by the IRS?||
Each request for transitional treatment will be reviewed to determine whether the taxpayer is eligible for transitional treatment, the taxpayer’s certification of non-willfulness is complete, and the available information is consistent with the certification. The examiner assigned to the case will make the initial determination and the examiner’s manager must concur. A central review committee may also review the determination. For those cases designated for central committee review, the examiner will document the facts and rationale for the determination, document the taxpayer statement of facts, and prepare a summary of the case to be forwarded to the committee for review.
The central review committee will review the facts of the case and the examiners determination and rationale to determine if it is consistent with other determinations made across the IRS. The central review committee will advise the examiner of concurrence, non-concurrence, or additional actions required to process the request. The decision of the central review committee is final and may not be appealed.
There are no appeal rights within OVDP, including the determination of whether the taxpayer qualifies for transitional treatment. If the IRS does not agree that the taxpayer is entitled to transitional treatment, the case remains governed by the terms of the OVDP in which the taxpayer is participating. In these circumstances, if the OVDP miscellaneous offshore penalty is unacceptable to the taxpayer, the taxpayer may opt out of the OVDP and choose to have the case resolved in an examination process.
|9.||If I seek and receive transitional treatment, how will the other aspects of my OVDP case be affected?||
All other terms of the OVDP in which the taxpayer is currently participating will continue to apply, including, but not limited to, the following: