Voluntary Disclosure for Offshore Accounts is Back
Posted by William Byrnes on March 17, 2011
The Internal Revenue Service announced earlier this week a special voluntary disclosure initiative (the second one of its kind in the past few years). The Internal Revenue Service states the program is designed to bring offshore money back into the U.S. tax system and assist individuals that may have undisclosed income from hidden offshore accounts to pay taxes owed. The new voluntary disclosure initiative will be available through Aug. 31, 2011.
The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. According to the IRS, the first special voluntary disclosure program finished with 15,000 voluntary disclosures on Oct. 15, 2009. Since that time, the Service notes, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world.
The new initiative is being called the 2011 Offshore Voluntary Disclosure Initiative, which includes several changes from the 2009 Offshore Voluntary Disclosure Program. The overall penalty structure for 2011 is higher, meaning that people who did not come in through the 2009 voluntary disclosure program will not be rewarded for waiting. However, the 2011 initiative does have additional features.
For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. However, some taxpayers will be eligible for lower 5 or 12.5 percent penalties. Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.
Read the analysis at AdvisorFYI
William Byrnes' Tax, Wealth, and Risk Intelligence 
John Walker said
The 5% penalty applies to accounts that were neither established by the taxpayer nor controlled by the tax payer. There are four criteria that must be met. The tax payer: (1) did not open or cause the account to be opened; (2) has exercised minimal, infrequent contact with the account; (3) has not withdrawn more than $1K from the account in any year during the look back period (unless the withdrawal was to move the account to the U.S.); and (4) can establish that all applicable U.S. taxes have been paid on
funds deposited to the account.
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