Offshore Voluntary Disclosure Deadline is Quickly Approaching
Time is running short for U.S taxpayers with undisclosed offshore accounts to participate in the IRS’ 2011 Offshore Voluntary Disclosure Initiative (OVDI). This program that gives those who reveal undisclosed accounts and incomes to the IRS a chance to do so with reduced fines and penalties will expire on August 31, 2011. A key element that those affected should remember is that the IRS will be phasing in new foreign account reporting requirements over the next few years. Their focus will be on closing the avenues used previously to hide foreign accounts and assets. The IRS will continue to focus on banks and bankers worldwide who assist in clients in hiding overseas assets.
The second offering of such a program, the 2011 OVDI was announces on February 8, 2011. It offers benefits to taxpayers who voluntary disclose unreported accounts, rather than risk detection by the IRS, which could lead higher penalties and possible criminal charges. “The time has come to get back into compliance with the U.S. tax system, because the risks of hiding money offshore keeps going up,” said IRS Commissioner Dough Shulman. “Our goal is to get people back into the system. The voluntary initiative gives people a fair way to resolve their tax problems.”
Under the 2011 initiative, individuals will be required to pay a penalty of 25% of the amount in the foreign account in the year with the highest aggregate account balance during the 2003 to 2010 tax years. Some taxpayers may be eligible for a 5% or 12.5% penalty in certain circumstances. Additionally, some may be better off entering into the program and then opting out of the penalty structure, however these will be few between. Nonetheless, participants will be required to file all original and amended tax returns by the deadline as well as paying back-taxes and interest for up to eight years and accuracy-related and/or delinquency penalties.
As a requisite of the program, those who chose to participate must also pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. All original and amended tax returns must be filed by the deadline which is AUGUST 31, 2011. Assistance with payment is available through the IRS.