The Internal Revenue Service (IRS) has reminded United States taxpayers with undisclosed offshore accounts that they are running out of time to take advantage of the 2011 Offshore Voluntary Disclosure Initiative (OVDI).
The IRS has confirmed that the OVDI, which was announced on February 8, will expire on August 31 this year. It follows the 2009 Offshore Disclosure Programme, and it was said that the IRS decision to open a second special disclosure initiative was based on the success of the first programme.
In the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25% of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers are eligible for 5% or 12.5% penalties in certain circumstances.
Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. All original and amended tax returns must be filed by the OVDI deadline.
The IRS pointed out that taxpayers who come forward voluntarily would get a better deal than those who wait for the IRS to find their undisclosed accounts and income. It noted that new foreign account reporting requirements are being phased in over the next few years.
“The time has come to get back into compliance with the US tax system, because the risks of hiding money offshore keep going up,” said IRS Commissioner Doug Shulman. “Our goal is to get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems.”
The IRS has confirmed that the OVDI, which was announced on February 8, will expire on August 31 this year. It follows the 2009 Offshore Disclosure Programme, and it was said that the IRS decision to open a second special disclosure initiative was based on the success of the first programme.
In the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25% of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers are eligible for 5% or 12.5% penalties in certain circumstances.
Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. All original and amended tax returns must be filed by the OVDI deadline.
The IRS pointed out that taxpayers who come forward voluntarily would get a better deal than those who wait for the IRS to find their undisclosed accounts and income. It noted that new foreign account reporting requirements are being phased in over the next few years.
“The time has come to get back into compliance with the US tax system, because the risks of hiding money offshore keep going up,” said IRS Commissioner Doug Shulman. “Our goal is to get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems.”
