Making Taxes Less Taxing!

Good news for those of you that missed last year’s Voluntary Offshore Disclosure Program.  Due to the great success the Internal Revenue Service has had in collecting funds (4.4 billion to date), the Service today reopened the program to help people hiding offshore accounts get current with their taxes. 

Unlike the previous programs, this “third times a charm” currently has no deadline.  This program will be open for an indefinite period until otherwise announced.  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.

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.

More details will be available within the next month at www.irs.gov.

In addition, the IRS will update key Frequently Asked Questions and providing additional specifics on the Offshore Program. 

For more information:

IRS Voluntary Offshore Tax Amnesty Initiative Ends August 31, 2011: Part I

IRS Voluntary Offshore Tax Amnesty Initiative Ends August 31, 2011: Part II

IRS Voluntary Offshore Tax Amnesty Initiative Extended to September 9, 2011