The Internal Revenue Service has announced a special voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be available through Aug. 31, 2011.
The decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. The first program closed with 15,000 voluntary disclosures on Oct. 15, 2009. Since that time, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world. These taxpayers will also be eligible to take advantage of the special provisions of the new initiative.
The new program–called the 2011 Offshore Voluntary Disclosure Initiative (OVDI)–includes several changes from the 2009 program. The overall penalty structure for 2011 is higher, meaning that people who did not come in through the 2009 program will not be rewarded for waiting. New features of the 2011 program include:
- A new framework that requires individuals to pay a penalty of 25 percent (up from 20 percent in 2009) of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. However, taxpayers in limited situations may qualify for a 5 percent penalty.
- A new penalty category of 12.5 percent for treating smaller offshore accounts. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the 2011 initiative will qualify for this lower rate.
- Participants must pay back-taxes and interest for up to eight years as well as pay accuracy-related and/or delinquency penalties.
Taxpayers participating in the new initiative must file all original and amended tax returns and include payment for taxes, interest and accuracy-related penalties by the Aug. 31 deadline.
The 2011 initiative offers clear benefits to encourage taxpayers to come in now rather than risk IRS detection. Taxpayers hiding assets offshore who do not come forward will face far higher penalty scenarios as well as the possibility of criminal prosecution, according to the IRS.
The IRS will also launch a new section on www.IRS.gov that includes the full terms and conditions on the 2011 Offshore Voluntary Disclosure Initiative and details on how to make a voluntary disclosure.
Contact us for more information.
