A third amnesty program for federal reporting of foreign assets is now available according to IR-2012-5. The IRS is typically, in most minds anyway, reluctant to give taxpayers a break – at least not three times over. Lets not break out the halos just yet. The 2011 Offshore Voluntary Disclosure Program (OVDP), the sequel to the 2009 program, brought the total of reported amounts to $4.4 billion. Not bad. Not bad at all.
The 2012 version of the OVDP has some changes (no deadline!). Here are a few: (1) Yes, no deadline, but the IRS states this can change and penalties might be increased; (2) If the taxpayer came forward from the previous OVDP programs, the taxpayer will be grandfathered in and qualifies under the new 2012 OVDP provisions; (3) Here it is: The penalty is 27.5% on the highest aggregate balance (foreign bank accounts, entities or assets) during the eight years before disclosure, up from 25% in 2011 and 20% in 2009. However, the 2011 reduced penalties of 5% and 12.5% remain (5% in limited situations, 12.5% if assets do not exceed $75k in any calendar year); (4) Participants must file all original and amended tax returns and include payment for eight years of back-taxes and interest in addition to accuracy-related and/or delinquency penalties. And, of course, taxpayers must file their FBARs; and (5) Taxpayers can still elect to proceed outside the program. Why would you? Because the treatment may be unfair or the penalties may be excessive. Opting out may cause for future audit. Even so, there may be more flexibility with taxpayer rights (audit defense, appeals, etc.) and procedural hoops the IRS has to go through once it makes assessments.
If you would like to participate in the OVDP program, need defense in an audit or IRS assessment for a like situation, or need assistance with Foreign Bank Account Reporting (FBAR). We can help, and the consultation is free. Please feel free to contact us.