The IRS is offering a second voluntary disclosure opportunity for those with offshore accounts. Those who wish to comply with the disclosure must do so by August 31, 2011. The program requires taxpayers to bring all tax filings up to date for years 2003 – 2010 and report any previous unreported taxable income. Although the 2011 voluntary disclosure program has larger penalties than the first program that ended October 15, 2009, the offer is still more appealing than the alternative fines and possible criminal prosecution.
Penalties under this new initiative are only 25% of the highest aggregate value during the 2003 – 2010 program time period. Certain taxpayers may only be subject to 12.5% or 5% penalties. Participants in the program would also need to pay back taxes and interest as well as accuracy and/or delinquency penalties. Taxpayers who do not comply with the program and are later discovered by the IRS could be subject to a higher 50% penalty or even 75% fraud penalty as well as criminal prosecution.
With the IRS increasing investigations in the international area and more information becoming available through tax treaties, the risk of hiding offshore accounts is only getting riskier. This may be the last opportunity to come to the IRS before the IRS comes to you.
Jill A. Helm, CPA