The IRS announced on February 8, 2011 a special voluntary disclosure initiative designed to bring foreign accounts back into the U.S. tax system and help people with undisclosed income to avoid civil and possible criminal penalties.
Are you an owner of a foreign account and have not been reporting to the IRS? Well now is the time to do so. The IRS announced on February 8, 2011 a special voluntary disclosure initiative designed to bring foreign accounts back into the U.S. tax system and help people with undisclosed income to avoid civil and possible criminal penalties. The new voluntary disclosure initiative has a deadline of August 31, 2011.
Many people may not realize that they have a foreign account that is subject to recently enacted laws that require owners to disclose it even if it does not generate any income. One example is when a U.S. citizen or permanent resident inherits an interest in a foreign account. The states that the person receives may be in a language that they do not understand and they may not be receiving any distributions. Nonetheless, they will still be subject to large civil penalties and, in theory, to criminal prosecution for failing to disclosure the account to the IRS.
This is the second time that the IRS has provided a voluntary disclosure program. The first special voluntary disclosure program closed with 15,000 voluntary disclosures on October 15, 2009. The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. The new initiative is called the 2011 Offshore Voluntary Disclosure Initiative (“OVDI”). OVDI provides a penalty framework that requires individuals to pay a penalty of twenty-five percent (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 will be eligible for lower penalties. Participants may also have to pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.
Lastly, if you think that you may own an interest in a foreign account, you should contact a tax professional who is familiar with the disclosure procedures and look into this opportunity. The tax attorneys at Reid & Hellyer in Riverside, Temecula and Orange County have handled these types of cases and have guided taxpayers through the procedural maze of IRS regulations, procedures and practices.
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