ANOTHER OFFSHORE VOLUNTARY DISCLOSURE WINDOW OPENED BY IRS

On January 9, 2012 IRS announced (IR-2012-5) that it has reopened the offshore voluntary disclosure program to encourage those with still undisclosed offshore accounts to come in from the cold.

IRS claims it has collected $4.4 billion thus far on the 2009 and 2011 programs. Unlike the two earlier programs the 2012 program will be open for an indefinite period.  I had strongly criticized the deadlines of the earlier programs and IRS wise to have the program continue indefinitely but with no guarantee that its terms will not change at any time going forward.  That threat is an incentive for taxpayers to come in early.  The 2011 program closed in September. 

Commissioner Doug Shulman stated, “Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers…”  Indeed IRS has redoubled its efforts to locate additional tax scofflaws by: pursuing other foreign banks as it did UBS, entering into more information exchange agreements with former tax haven jurisdictions and mining the information obtained from participants in the first two offshore programs.  Also, required 2011 filing of FATCA’s (Foreign Account Tax Compliance Act) Form 8938, Statement of Specified Foreign Financial Assets, with Form 1040, is yet another incentive for individuals to seek shelter from the draconian potential civil and criminal sanctions, if caught, an event becoming more likely.

IRS within the next month will provide more details and updated Frequently Asked Questions with specifics for the new OVDP will also be available soon.  At this juncture IRS has announced that the new penalty framework will be 27.5 percent for most participants with some taxpayers in limited situations qualifying for a 5 percent penalty and smaller foreign accounts (assets not surpassing $75,000)  facing a 12.5 percent penalty.  As in the earlier program taxpayers can elect to opt out and take their chances on examination for a lower or higher penalty than that provided in the program.

IRS is also studying how to deal with taxpayers, such as dual citizens or others, who did not file FBARS but owe no tax that they can come into compliance withU.S.tax law.

© 2011 by Robert S. Steinberg, Esquire
All rights reserved

This entry was posted in COMPLIANCE, NEW OVDP, TAX and tagged , , , . Bookmark the permalink.

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