The Internal Revenue Service on January
9, 2012 reopened the offshore voluntary disclosure program to help
people hiding offshore accounts get current with their taxes.
The IRS
reopened the Offshore Voluntary Disclosure Program (OVDP) following continued
strong interest from taxpayers and tax practitioners after the closure of the
2011 and 2009 programs. The third offshore program comes as the IRS continues
working on a wide range of international tax issues and follows ongoing efforts
with the Justice Department to pursue criminal prosecution of international tax
evasion. This program will be open for an indefinite period until
otherwise announced.
The program
is similar to the 2011 program in many ways, but with a few key differences.
Unlike last year, there is no set deadline for people to apply. However,
the terms of the program could change at any time going forward. For
example, 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.
Since the
2011 program closed last September, hundreds of taxpayers have come forward to
make voluntary disclosures. Those who have come in since the 2011 program
closed last year will be able to be treated under the provisions of the new
OVDP program.
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
percent 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. That is up from 25 percent in the 2011 program. Some taxpayers will
be eligible for 5 or 12.5 percent penalties; these remain the same in the new
program as in 2011.
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.
Participants
face a 27.5 percent penalty, but taxpayers in limited situations can qualify
for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent
penalty. People whose offshore accounts or assets did not surpass $75,000 in
any calendar year covered by the new OVDP will qualify for this lower rate. As
under the prior programs, taxpayers who feel that the penalty is
disproportionate may opt instead to be examined.
The IRS is
currently developing procedures by which dual citizens and others who may be
delinquent in filing, but owe no U.S.
tax may come into compliance with U.S. U.S.
Official announcement on:
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