The IRS has given taxpayers yet another chance to step forward and report income from offshore accounts without facing criminal prosecution. The first two Offshore Voluntary Disclosure Initiatives (OVDI) that were launched in 2009 and 2011 brought in over $4.4 billion to the IRS with about 33,000 participants. The IRS has decided to reopen the program for an indefinite period of time until otherwise announced.
The OVDI gives taxpayers the chance to voluntarily report offshore accounts and any income earned from those accounts for tax years 2003 – 2010. Under the OVDI, taxpayers have to pay penalties and interest, but are not faced with criminal prosecution. The provisions under this new program are generally the same as the 2011 program with a couple modifications. Increased from 25% under the 2011 program, taxpayers in the highest penalty category will be subject to a 27.5% penalty on the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. Participants are required to file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquent penalties.
Although taxpayers may hesitate to voluntarily come forward and pay these taxes and penalties, many understand that coming forward is a better option than having the IRS come to them first. The IRS hopes that those who were on the fence under the previous programs will make the decision to come forward under the new program.
Jill A. Helm, CPA