IRS Offers New Streamlined Procedures & Reduced Penalties for Foreign Accounts

Posted on June 25, 2014 by admin

The IRS recently revised and updated the 2012 Offshore Voluntary Disclosure Program. The modified program takes effect on July 1, 2014 and provides streamlined procedures and reduced penalties for U.S. taxpayers with foreign bank accounts.

The new streamlined procedures are available to U.S. taxpayers residing both inside and outside the United States whose failure to disclose offshore assets was non-willful. The new procedures create an opportunity to disclose unreported accounts under terms (especially reduced penalties) that were not otherwise available under the existing 2012 Offshore Voluntary Disclosure Program.

The new procedures also provide transition opportunities for certain taxpayers enrolled in the current OVDP program (but who have not yet entered into a closing agreement) and others who have made quiet disclosures.

The IRS announcement of the modified program can be found here.

IRS Announces Another Offshore Voluntary Disclosure Program

Posted on January 10, 2012 by admin

The IRS seems to have taken a nod from the legendary Yankee backstop, Yogi Berra, because “it’s déjà vu all over again.”

On January 9, 2012, the IRS announced that it was “reopening” the Offshore Voluntary Disclosure Program (OVDP) for an indefinite period. This is the latest incarnation of foreign bank account disclosure initiatives undertaken by the IRS. Prior programs included the 2003 Offshore Voluntary Compliance Initiative (OVCI), the 2009 Offshore Voluntary Disclosure Program (OVDP), and the recently closed 2011 Offshore Voluntary Disclosure Initiative (OVDI). The IRS seems to have adopted the name of the 2009 program, i.e., OVDP, for this current initiative.

The current program will track many of the requirements of the 2011 OVDI program but with some important, if still undefined, differences. First, the current OVDP will be open for an indefinite period. The IRS does note, however, that it may announce a closing date at any time in the future. There is no deadline for filing a disclosure under the current program but again the IRS notes that it could change the terms of the program at any time. The IRS announcement for the new program also specifically suggests that it may increase penalties for all or some taxpayers, or certain defined classes of taxpayers. The IRS promises additional guidance on the new program within the next month and another update to the frequently asked questions (FAQs) published under the 2011 OVDI program.

One known change from the 2011 OVDI program is that penalties for taxpayers in the highest penalty bracket will be increased to 27.5% under the new program. The disclosure penalty rates for volunteers holding fewer assets in foreign account will remain at 5% and 12.5%, at least for the time being. Volunteers still 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. Volunteers who feel the penalty is disproportionate may still opt for an examination upon filing.

The current disclosure program, like its predecessors, is directed at U.S. taxpayers who hold interests in offshore or foreign bank accounts. U.S. taxpayers include U.S. citizens, dual citizens, permanent residents, and non-U.S. citizens who may be “substantially present” in the U.S. for tax purposes. The initiative tracks the annual requirement to file Foreign Bank Account Report (FBAR), Form TD F 90-22.1. The initiative covers any bank, securities, mutual fund or other financial instrument accounts held with a financial institution. It does not include individual bond holdings or stock certificates.

Finally, the press release notes the recognition by the IRS that dual citizens and others may be delinquent in meeting the FBAR filing requirements but still owe no U.S. tax. This long overdue recognition is accompanied by a promise that the IRS is developing procedures to allow these taxpayers to come into compliance with the law.

Offshore Account Disclosure (OVDI) Deadline Extended Due to Hurricane Irene [Updated]

Posted on August 29, 2011 by admin

On Friday, in anticipation of the impact of Hurricane Irene, the IRS announced that it would extend the deadline for offshore voluntary disclosure initiative (OVDI) requests from August 31, 2011 until September 9, 2011. Taxpayers considering the OVDI program and who wish to take advantage of the extended due date for filing should take note that they are required to send two separate requests to two different IRS offices as noted below.

[Update 8/29/11] – The IRS clarifies that the September 9, 2011 extension also applies to taxpayers filing FBARs pursuant to FAQs 17 and 18.

Taxpayers with undisclosed offshore accounts who have yet to submit a request to participate in the program (and the necessary supporting documentation) now have until September 9, 2011 to:

Send identifying information to the Criminal Investigation office. The required identifying information is name, address, date of birth, and social security number. Voluntary filers are also asked to send as much of the other information requested in the Offshore Voluntary Disclosures Letter as possible. Requirements of the OVDI Letter can be found here. This information must be sent to:

Offshore Voluntary Disclosure Coordinator
600 Arch Street, Room 6404
Philadelphia, PA 19106.

Send a request for a 90-day extension for submitting the complete voluntary disclosure package of information to the Austin campus. Information about the complete OVDI disclosure packet can be found here. This request must be sent to:

Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative