IRS launches third offshore voluntary disclosure program

With more than $4.4 billion collected in its 2009 and 2011 voluntary disclosure initiatives, the IRS in January announced its third program designed to encourage taxpayers with undisclosed offshore accounts to disclose them and fulfill related tax obligations (IR-2012-5).

The new program, unlike the previous initiatives, has no deadline to apply. However, the IRS emphasized that its terms could change at any time. The IRS stated that, for example, the penalties under the program could be increased or it could be ended at any point.

The new program handles penalties the same way the 2011 program did (see previous JofA online news coverage at tinyurl.com/7lrlw4s), except that the penalty on the highest aggregate account balance in the taxpayer’s foreign bank accounts during the years at issue is increased from 25% in the 2011 program to 27.5% in the new program. Individuals with offshore accounts or assets of less than $75,000 in any calendar year covered by the new initiative will qualify for a 12.5% penalty rate. Some taxpayers will qualify for a 5% rate, but only in narrow circumstances, including in the case of foreign residents who are unaware that they are U.S. citizens.

Also as in the 2011 program, participants must file all original and amended returns for the affected years and pay back taxes and interest for up to eight years and pay accuracy-related and/or delinquency penalties.

The IRS announced that it would update the frequently asked questions on its website addressing the 2011 program (tinyurl.com/5sflxql) to reflect the new program.

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