Taxpayers Take Notice: IRS Issues New Voluntary Disclosure Guidelines for Overseas Accounts

Authored by: Scott Harty, Esq.
On January 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program (the “2012 OVDP”) to U.S. taxpayers who wish to voluntarily disclose unreported offshore assets.  Taxpayers wishing to participate in the 2012 OVDP must file amended returns for the years covered by the 2012 OVDP (generally the prior 8 years); pay any unpaid taxes, penalties, and interest; file FBAR Forms (Form TD F 90-22.1) for all undisclosed foreign accounts held by the taxpayer during the period covered by the 2012 OVDP; and pay a one time penalty equal to 27.5% of the highest aggregate balance of the taxpayers unreported foreign assets during the years covered by the 2012 OVDP.  Specifically, the offshore penalty applies to any and all of a taxpayer’s offshore holdings that are in any way related to non-compliance with the U.S. tax laws.  Therefore, the penalty applies not only to bank accounts, but also to tangible assets such as art or real estate.

Unlike the IRS’s first two offshore voluntary disclosure programs (the 2009 and the 2011 programs), there is no deadline by which taxpayers wishing to participate must submit all of their data.  Otherwise, though, the terms of the 2012 OVDP are virtually identical to the terms of the 2011 program (with the exception of the offshore penalty being increased from 25% to 27.5%). The availability of the reduced 5% and 12.5% offshore penalty for certain taxpayers remains unchanged.  Nevertheless, taxpayers wishing to voluntarily disclose their offshore holdings should attempt to comply as soon as possible, as the IRS reserved the right to change or amend the terms of the 2012 OVDP at their discretion.

While the 2012 OVDP, like the 2009 and 2011 programs, offers taxpayers a fairly well defined means of bringing their account into full compliance, some taxpayers will be better served by disclosing their foreign assets outside the confines of the 2012 OVDP.

If you are unsure whether the 2012 OVDP is the best option for your circumstances, please contact Scott Harty in Smith, Gambrell & Russell’s tax practice to discuss the various options available to you.

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