Offshore Voluntary Disclosure Program
On January 9, 2012 the IRS reopened the offshore voluntary disclosure program. There is not set deadline to apply. However, the terms of the program could change at any time. The IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.
This third offshore effort came as the IRS announced closures of about 95% of the cases from the 2009 program. That number will grow as the IRS processes the 2011 cases.
The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category. For the new program, the penalty framework requires individuals to pay a penalty of 27.5% of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure.
Filing a Voluntary Disclosure of Offshore Accounts
Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.
The offshore enforcement and disclosure programs have raised awareness for dual citizens and others who may be delinquent in filing, but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law.
For help with offshore tax issues, contact our office for a free consultation!