On Tuesday, February 8, 2011, the Internal Revenue Service announced a new amnesty program for taxpayers with hidden offshore bank accounts. The new Voluntary Disclosure Initiative is intended to bring people with unreported offshore income and undisclosed offshore accounts back into compliance.
This new program, called the 2011 Offshore Voluntary Disclosure Initiative (OVDI), follows the 2009 Offshore Voluntary Disclosure Program, which was considered a success by the IRS and tax community, bringing over 15,000 taxpayers into compliance and generating over $400 million for the government. The terms of the new initiative are tougher, meaning that people who did not come in through the 2009 voluntary disclosure program will not be rewarded for waiting. The 2011 initiative also adds new features.
The program makes clear that taxpayers who voluntarily come forward will not to face prosecution for tax evasion. The program will require individuals to pay a penalty of 25% of the amount in their foreign bank accounts in the year with the highest aggregate account balance over eight years from 2003 through 2010. Under the regularly applicable penalties, a taxpayer could pay up to 50% of the highest amount in each account for each year over six years. The taxpayers will also be required to amend their tax returns, and pay back taxes and interest for up to eight years, as well as delinquency and accuracy-related penalties.
Some taxpayers may be eligible for reduced penalties of 5% or 12.5%. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the 2011 initiative will qualify for the 12.5% penalty. In certain circumstances, such as inherited offshore accounts, taxpayers may qualify for the 5% penalty.
The deadline for participating in the new Voluntary Disclosure Program is August 31, 2011.
You can read the full text of the IRS announcement here: http://www.irs.gov/newsroom/article/0,,id=235695,00.html
Copyright (c) 2011 Igor S. Drabkin. All Rights Reserved.