The IRS opened a second offshore voluntary disclosure initiative (OVDI) on February 8 that is scheduled to run through August 31, 2011. The IRS offers a reduced penalty framework to taxpayers who fully disclose previously unreported offshore accounts.
IRS Commissioner Douglas Shulman announced that the 2011 initiative includes a 25 percent penalty on the amount in the foreign bank accounts for the year with the highest aggregate account balance covering the 2003 to 2010 period.
However, lower penalties of 12.5 percent or 5 percent may apply to taxpayers in certain situations.
The 12.5 percent penalty will apply to small (less than $75,000) offshore accounts.
The 5-percent penalty may apply for:
The taxpayer who:
- • did not open or cause the account to be open
- • had minimal contact with the account
- • has not withdrawn more than $1,000 from any year (other than closing transfers to a US account)
- • has paid any applicable US taxes on amounts deposited to the account
Individuals who are foreign residents and who were unaware they are U.S. citizens
Taxpayers who participated in the 2009 OVDI but would have qualified for this lower 5 percent penalty
To participate in this initiative, taxpayers must file all original and amended returns for 2003 through 2010 and pay all taxes, interest and accuracy-related penalties by August 31, 2011.
More information is available in the IRS News Release IR-2011-14, which can be seen by clicking here.
If you have any other questions, please contact Karisa Chin at email@example.com.
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