The penalty framework for offshore voluntary disclosure and the agreement to limit tax exposure to an 8 year period are package terms under the OVDP. If any part of the offshore penalty is unacceptable to the taxpayer, the case will be examined and all applicable penalties will be imposed. After a full examination, any tax and penalties imposed by the IRS may be appealed, but the IRS’ decision on the terms of the OVDP closing agreement may not be appealed.
Offshore voluntary disclosure examiners do not have discretion to settle cases for amounts less than what is properly due and owing under the IRS OVDP guidelines.
If undertaking a voluntary disclosure, a taxpayer disagrees with the application of the offshore penalty, the taxpayer must indicate in writing the decision to withdraw from or opt out of the program. Once made, this election is irrevocable. An opt out is an election made by a taxpayer to have his or her case handled under the standard audit process. If issues are found upon a full scope audit that was not disclosed by the taxpayer, those issues may be referred to the IRS Criminal Investigation Division.
Opting out of the civil settlement structure does not affect the status of a taxpayer’s voluntary disclosure under IRS’ Criminal Investigation’s Voluntary Disclosure Practice, so long as the taxpayer provides all requested foreign records and submits to interrogation and as long as no new issues are uncovered that were previously not disclosed.