The Internal Revenue Service on Thursday unveiled a significantly revised voluntary disclosure program for taxpayers with undisclosed foreign financial accounts, replacing the complex and penalty-heavy 2018 program.
Under the new program, taxpayers who come forward before any IRS contact face a reduced penalty structure: a one-time 10% penalty on the highest aggregate account balance (down from 27.5% or 50% under prior programs), no FBAR penalties for non-willful violations, and a streamlined six-month processing window. Criminal prosecution will be waived for qualifying disclosures.
IRS Commissioner Daniel Werfel said the changes are designed to encourage compliance. 'The old program was too punitive. People stayed out, and we collected nothing. This new approach brings money back into the system,' Werfel said.
Deadline and eligibility
The program is open for one year — until April 1, 2027. To be eligible, taxpayers must have undisclosed foreign accounts, assets, or entities and must not have been previously contacted by the IRS about offshore compliance. Willful tax evasion involving more than $5 million per year may still face criminal referral.
Tax attorneys welcomed the changes. 'This is the most sensible offshore program since the 2009 OVDP,' said former IRS attorney Scott Michel. 'It will actually bring people in.'
The old program was too punitive. People stayed out, and we collected nothing. This new approach brings money back into the system.
The IRS estimates that 800,000 U.S. taxpayers have undisclosed foreign accounts. The new program is projected to bring in $15 billion over five years, compared to $2 billion annually under the old program.
