IRS rescinds Offshore Voluntary Disclosure Program acceptance for some applicants

In a surprise development, IRS has been informing U.S. taxpayers who are clients of Israel's Bank Leumi that the agency has rescinded their prior acceptance into the Offshore Voluntary Disclosure Program (OVDP), various news outlets have reported. IRS issued a statement that it is prohibited by federal law from commenting on specific cases. However, the agency acknowledged that the “particular declination letter” sent to the affected taxpayers is only used “in rare circumstances.” There are several situations that can result in disqualification from participation in the program, IRS said. One example is the taxpayer's failure to make a timely, truthful and complete disclosure of relevant information. There has been rampant speculation as to the underlying reason for IRS's rescission of acceptances into the OVDP. For example, the agency may already have had the name of a taxpayer on a list of people holding secret accounts and improperly processed such information internally. Another possibility offered by attorneys is that IRS may be cherry-picking those it wants to prosecute. There are reports that some clients of Israel's Mizrahi Tefahot Bank also have received declination letters.