The IRS Offshore Voluntary Disclosure Initiative allows you to voluntarily come forward about offshore accounts, on which you may owe taxes to the IRS, without fear of criminal retribution.
The reasoning behind the program, according to the IRS's website, "Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution."
The benefits to the taxpayer are thus clear. The IRS has reported that it has collected more than $4.4 billion due to the two prior periods, and as a result of this success it has decided to open a third period for voluntary disclosure with an indefinite ending period. This means that there is currently no filing deadline to voluntarily disclose offshore assets.
Under the Offshore Voluntary Disclosure Initiative generally, participants generally have to:
- File all (relevant) original and amended tax returns
- Include payment for back-taxes and interest for up to eight years
- Pay accuracy-related and/or delinquency penalties.
- Participants face a 27.5 percent penalty (on the highest aggregate balance of unreported assets)
- Taxpayers in limited situations can qualify for a 5 percent penalty
- Smaller offshore accounts will face a 12.5 percent penalty (assets or accounts less than $75,000/calendar year)
As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined. Taxpayers who choose to not disclose their assets may face much higher penalties and potentially face prison time.
The IRS's announcement is significant, because in years past, the program had stringent deadlines, after which the amnesty was no longer available.
Contact a Tax Attorney today to find out whether you qualify for the Voluntary Offshore Disclosure Initiative.
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