Do you have a signature authority on a foreign bank account? Do you have a direct or indirect interest in a foreign bank account? If you answered yes to either of these questions, but have not disclosed your foreign bank accounts on your tax return or filed the Form 90-22.1, then read on.
The Internal Revenue Service (IRS) has recently announced that U.S. taxpayers who have undisclosed foreign financial accounts or entities or have income generated in foreign countries but who have not reported that income on their income tax returns have until September 23, 2009 to make a voluntary disclosure to the IRS of all unreported income, pay the tax on this income and tax interest, and pay certain penalties. In return the IRS will not recommend criminal prosecution to the Department of Justice, or assess other penalties if the disclosure is truthful, timely, and completely complies with all provisions of the voluntary disclosure practice (VDP).
The offer the IRS is making requires taxpayers to make a voluntary disclosure of previously unreported foreign income for tax years 2003 through 2008, inclusive, but no later than September 23, 2009. If accepted into the VDP program the taxpayer must pay: (1) the tax on the unreported income; (2) interest on the tax; (3) an accuracy related penalty of 20% on the tax due; (4) an additional 20% penalty on the highest aggregate foreign account balance in the six years (2003-2008).
Note that this is a package offer – a rejection of any one of the above conditions by the taxpayer will prevent the taxpayer from being permitted to take advantage of the limited penalty assessment and avoid the risk of criminal sanctions.
There are more details involved in the program. Please contact an advisor quickly so you can determine if your situation fits the program requirements.
By Debra Callicutt, CPA