Effective as of the date of this memorandum for all offshore voluntary disclosures received after the close of the 2009 Offshore Voluntary Disclosure Program (2009 OVDP), you are authorized until further notice to execute agreements to resolve the tax liabilities related to offshore issues of taxpayers who make voluntary disclosure requests in the following manner:
(1) Assess all taxes and interest due for the years 2003 through 2010 (exception: for accounts opened or received within this period, assess all taxes and rnterest due starting with the year the account opened or was received). Require the taxpayer to file or amend all returns, including information returns and Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, commonly known as an "FBAR", and all other documents set forth in the Submission Requirements.
(2) Assess an accuracy-related penalty on all years (no reasonable cause exception may be applied), and assess failure to file and failure to pay penalties when applicable.
(3) In lieu of all other penalties that may apply, including FBAR and information return penalties, assess an offshore penalty equal to 25% (or 12.5% or 5% if the required conditions are met) of the amount in foreign financial accounts/entities and the value of foreign assets acquired with untaxed funds or producing untaxed income in the year with the highest aggregate account/asset value.
(4) If a taxpayer meets all four of the following conditions, then the offshore penalty is reduced to 5%: (a) did not open or cause the account to be opened (unless the bank required that a new account be opened, rather than allowing a change in ownership of an existing account, upon the death of the owner of the account); (b) has exercised minimal, infrequent contact with the account, for example, to request the account balance, or update accountholder information such as a change in address, contact person, or email address; (c) has, except for a withdrawal closing the account and transferring the funds to an account in the United States, not withdrawn more than $1,000 from the account in any year covered by the voluntary disclosure; and (d) can establish that all applicable U.S. taxes have been paid on funds deposited to the account (only account earnings have escaped U.S. taxation). For funds deposited before January 1, 1991, if no information is available to establish whether such funds were appropriately taxed, it will be presumed that they were.
(5) If a taxpayer is a foreign resident who was unaware that he or she was a U.S. citizen, then the offshore penalty is reduced to 5%.
(6) If a taxpayer's highest aggregate account balance (including the fair market value of assets in undisclosed offshore entities and the fair market value of any foreign assets that were either acquired with improperly untaxed funds or produced improperly untaxed income) in each of the years covered by the 2011 OVDI is less than $75,000, then the offshore penalty is reduced to 12.5 percent.
Examiners and their managers have no authority to negotiate different offshore penalty percentages for 2011 OVDI cases.The reduced rates mentioned in (4) and (6) are available for the 2009 OVDI program.
For additional information on the OVDI, see the links to the right of this blog.