The Internal Revenue Service has announced that a voluntary disclosure initiative has been implemented that is designed to bring money that is held offshore back to the U.S., which will assist people with income in hidden offshore accounts to become current with their taxes. The disclosure initiative is voluntary and will be available through Aug. 31st of this year. Individuals with hidden off-shore accounts would be wise to consult with a tax professional in order to get the best information and comply with the regulations.
IRS Commissioner Doug Shulman says, “As we continue to gather more information and follow more people internationally, the risk to individuals hiding assets offshore increases.” He goes on to say, “This new effort gives people who are hiding money in foreign accounts a tough, fair way to resolve their tax problems. It also gives them a chance to come in before we find them.”
The IRS has decided to open another initiative which follows taxpayers with foreign accounts. The first disclosure program closed with 15,000 individuals sending voluntary disclosures on Oct. 15, 2009. Since then, over 3,000 taxpayers have come forward with bank account information from around the world. They are now eligible to take advantage of the provisions of this new initiative.
The goal here is to get this money back in the U.S. For the IRS, fighting international tax evasion is a top priority. According to the IRS, there are many more banks under review. The situation is said to get worse for taxpayers who are hiding their assets and income in offshore banks. This new disclosure initiative is their best chance for them to get back into the system.
The new initiative, called the 2011 Offshore Voluntary Disclosure Initiative, includes many revisions from the 2009 Initiative. The penalty is higher now, which means that people who did not come forward in 2009 won’t be rewarded for coming forward now. The 2011 initiative does have new features, though.
There is a new structure which requires taxpayers to pay a penalty of 25% of the amount in those foreign bank accounts. A few of those taxpayers may be eligible for 5% or 12.5% penalty. Those who comply with the voluntary initiative must also pay back-taxes, and interest, for eight years. They will also be required to pay accuracy-related and/or delinquency penalties.
Taxpayers who participate in this voluntary initiative will have to file all original and amended tax returns. They will also have to include their payments for taxes owed and other penalties by the Aug. 31 deadline.
The IRS also states that they will be making additional modifications to the 2011 disclosure initiative.
Participants will be faced with a 25% penalty, but taxpayers who qualify for limited situations will receive a 5% penalty.
The IRS appointed a new penalty class of 12.5% for smaller offshore accounts. Those with offshore accounts or assets below $75,000 qualify for this lower rate.
The 2011 initiative gives benefits taxpayers which should encourage them to come in now instead of waiting for the IRS to find them. Taxpayers who currently have offshore assets who don’t come forward will face much bigger penalties and the possibility of criminal charges.
Doug Shulman stated that this initiative is fair. It allows people with offshore accounts to come forward so they can “get right” with the IRS. The initiative gives them the opportunity to receive accurate information about how their case will be handled by the IRS. Those taxpayers who do come in on their own accord will also avoid criminal prosecution.
The IRS is taking care of these voluntary disclosures in central areas of the United States to be more efficient in the processing of the applications.
The IRS recently launched a section on irs.gov that includes the terms and conditions of the 2011 Offshore Voluntary Disclosure Initiative. It also includes a set of questions and answers to assist taxpayers and tax professionals alike. The IRS web site also has a detailed section where people can make their voluntary disclosure.
In the 2009 voluntary disclosure program, taxpayers were looking at a 20% penalty that covered a six-year period. Approximately 15,000 taxpayers presented the IRS with voluntary disclosures in an effort to avoid the high penalties. These disclosures covered banks in over 60 countries.
Shulman said this international effort will increasingly continue as the year goes on.
Secrecy in taxes continues to fall apart. The IRS is not giving up on these international issues. For those taxpayers who are hiding cash or assets offshore, the IRS advises that they come forward now because their risk of being caught is becoming greater.
Daniel Stoica Accounting Professional