Offshore Voluntary Disclosure Program (OVDP): Safely reporting hidden foreign assets
Many Americans living overseas open savings and foreign financial accounts as they build new lives abroad. Then, they learn the IRS still needs reports about those accounts and income from them. The Offshore Voluntary Disclosure Program once helped people fix old tax mistakes and stay in good standing with the IRS, but it was complex to use. As global reporting grew and countries began sharing more account data, the program was replaced by easier voluntary disclosure and streamlined filing compliance options that continue to guide taxpayers today.
In this guide by Taxes for Expats, we show how today’s disclosure options can help you achieve peace of mind after the end of OVDP. Let our experts guide you in managing your foreign financial assets through the proper procedure.
What was the Offshore Voluntary Disclosure Program (OVDP)?
In 2017, the D.C. Circuit in Maze v. IRS said the agency could decide how to run and end the OVDP. That decision confirmed the close of the program and the shift to new rules.
The Offshore Voluntary Disclosure Program had helped US expats fix past tax problems from money kept in other countries, allowing them to send in late returns, pay tax and interest, and face one set offshore penalty on the highest total value. It began in 2009 with a 20 percent rate, rose to 25 percent in 2011 with limited 5 and 12.5 percent tiers, and then changed to 27.5 percent in 2012.
From July 1, 2014, accounts linked to listed banks faced a 50 percent rate. The OVDP ended on September 28, 2018, and now willful cases go through the IRS Criminal Investigation Voluntary Disclosure Practice using Form 14457, with Part II due 45 days after preclearance.
At its core, the program’s main purpose was to make things right with the IRS and give clear penalty terms.
- It replaced uncertain FBAR and reporting risks with a one-set offshore penalty on the highest amounts.
- It asked for six years of FBARs for foreign financial accounts and full payment of tax and interest on corrected returns tied to foreign financial assets.
Alternative compliance paths after OVDP
When the IRS closed the Offshore Voluntary Disclosure Program in 2018, it routed taxpayers into newer, clearer tracks. The choices are now split between willful conduct that needs protection and non-willful mistakes that need simplified cleanup.
For willful histories, Criminal Investigation’s Voluntary Disclosure Practice is the official door to resolve issues and manage criminal exposure. It starts with Form 14457, a two-part filing that follows preclearance and moves to a detailed narrative and documentation.
For non-willful mistakes, the streamlined filing procedures offer a defined lookback and predictable penalties or penalty relief. They require a signed certification of non-willfulness, three years of amended returns, and six years of FBARs as applicable.
- Streamlined Foreign Offshore Procedures (SFOP)
- Streamlined Domestic Offshore Procedures (SDOP)
- Delinquent FBAR Submission Procedures (DFSP)
- Delinquent International Information Return Submission Procedures (DIIRSP)
Each option differs in scope, penalty structure, and eligibility, offering distinct paths compared to the former Offshore Voluntary Disclosure Program.
| Program | Who it applies to | Key penalty terms |
|---|---|---|
| OVDP | Willful offshore noncompliance | 27.5% standard or 50% for listed institutions |
| CI VDP | Willful cases needing criminal protection | Civil fraud and FBAR penalties under IRM 9.5.11.9 |
| SFOP | Non-willful taxpayers living abroad | No Title 26 miscellaneous penalty |
| SDOP | Non-willful taxpayers in the US | 5% miscellaneous offshore penalty |
| DFSP | Reported income, missed FBARs only | No FBAR penalty if all criteria met |
| DIIRSP | No extra tax, missed Forms 3520, 5471, 8938 | Penalties may apply if reasonable cause not accepted |
How a tax attorney or CPA can help
For expats who fell behind on their US taxes, getting back on track shouldn’t be stressful. The Streamlined Filing Procedure was designed to help honest taxpayers become compliant without heavy penalties – and that’s exactly where Taxes for Expats comes in. Our experts know how to make the process simple, safe, and clear for Americans living abroad.
When you reach out to TFX, a dedicated tax professional reviews your history, identifies what needs fixing, and prepares all filings from start to finish. We handle every step – from gathering your foreign account details to submitting accurate returns – so you can meet IRS requirements confidently and move forward with peace of mind.
