Tuesday, February 8, 2011

IRS Announces Second Special Voluntary Dislcosure Initiative for Offshore Accounts

The IRS announced today a special voluntary disclosure program. For now, I will just link to the announcement here. and provide only the bullet points I see with no (or very limited) editorial comment:

1.  The deal is available through 8/31/11.  (Note, however, taxpayers must "file" the required amended income tax returns discussed in paragraph 3 below by 8/31/11, so last minute decisions to join the program apparently will not work, particularly in light of the lead time required to obtain documents from foreign banks.)

2.  The in lieu of FBAR penalty is 25% of the highest aggregate balance in the foreign account(s) from 2003 to 2010.  Some taxpayers will be eligible for lower penalties. 

3.  Taxpayers must amend all affected income tax returns during the years 2003 - 2011 and pay the resulting taxes, pay either a 20% accuracy related penalty in the case of filed returns or the up to 25% failure to file penalty in the case of unfiled returns, and pay interest on both.  These returns must be filed by 8/31/11.  Some taxpayers will be eligible for lower penalties.

4.  A 12.5% penalty rate will apply if the aggregate balance did not exceed $75,000 in any of the years from 2003-2010.  Presumably this lower rate will be both for the in lieu of FBAR penalty and the income tax penalty.  There is also mention of a 5% rate in "limited situations."

Additional Information from IRS:
IRS / Shulman Announcement of OVDI Program
2011 OVDI Frequently Asked Questions (pdf)
2011 OVDI Frequently Asked Questions (link to IRS site)
How to Make a Voluntary Disclosure
Voluntary Disclosure Contacts

As Corrected 2/9/11

1 comment:

  1. Jack,

    I'm sure you've also read through the new 2011 OVDI FAQs and noticed that the Service has refined and streamlined the voluntary disclosure process, based on the issues that arose during the 2009 OVDP. For instance, the PFIC issue is now set forth at the outset. Also, tax and penalty has to be paid upfront and not at the conclusion of the process. There also appears to be greater centralization, as opposed to the prior program which saw disclosures spread to agents and field offices across the country, as well as re-assignments and transfer to new agents midway through the process.


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