The IRS has announced a second special voluntary disclosure initiative for U.S. taxpayers with money in offshore banking accounts. The initiative, which is available through August 31, 2011, is aimed at bringing offshore money back into the U.S. tax system and allowing holders of offshore accounts to become up to date with their taxes.
Following the success of the 2009 Offshore Voluntary Disclosure Program (OVDP) and continuing taxpayer interest in voluntary disclosure, the IRS decided to open a second initiative, called the 2011 Offshore Voluntary Disclosure Initiative (OVDI). The new initiative imposes a higher penalty structure than the original program, but still allows taxpayers to avoid the much higher penalties, and potential criminal prosecution, they would otherwise incur upon IRS detection.
According to IRS Commissioner Doug Shulman, “As we continue to amass more information and pursue more people internationally, the risk to individuals hiding assets offshore is increasing. This new effort gives those hiding money in foreign accounts a tough, fair way to resolve their tax problems once and for all. And it gives people a chance to come in before we find them.”
Under the new initiative, taxpayers will pay a 25% penalty on the accounts, although some taxpayers will qualify for lower penalty rates of 5% and 12.5%. They will also have to pay back-taxes and interest, as well as any penalties for delinquency or inaccuracy.
Taxpayers who wish to participate in the new initiative must file all original and amended tax returns by August 31, 2011, along payment for taxes, interest, and any penalties.
To learn more about the 2011 Offshore Voluntary Disclosure Initiative, go to www.irs.gov/newsroom/article/0,,id=234900,00.html.