HOT NEWS: Do you have a bank account in a foreign country?
On February 8, 2011, the Internal Revenue Service announced the 2011 Offshore Voluntary Disclosure Initiative (OVDI). The OVDI is designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. This voluntary disclosure initiative will be available through Aug. 31, 2011.
The 2011 Offshore Voluntary Disclosure Initiative has several changes from the prior 2009 Offshore Voluntary Disclosure Program (OVDP). The overall penalty structure for 2011 is higher. However, the 2011 initiative does add new features.
There is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period.
The good news is that some taxpayers will be eligible for 5 or 12.5 percent penalties (offshore accounts or assets that did not surpass $75,000 in any calendar year may qualify for the 12.5 percent penalty). Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.
The OVDI offers benefits to encourage taxpayers to volunteer to come forward and become tax compliant now rather than risk IRS detection. If taxpayers continue to hide their assets offshore and do not come forward, they will face much higher penalty scenarios as well as the possibility of criminal prosecution. The taxpayer must disclose themselves to the IRS before IRS detection. Otherwise, the taxpayer becomes ineligible to participate in the OVDI. So sooner rather than later is best.
Our office assisted a multitude of taxpayers in the 2009 Offshore Voluntary Disclosure Program (15,000 entered the program nationwide). If you wish to discuss participating in the 2011 Offshore Voluntary Disclosure Initiative (OVDI), please contact our office to schedule a confidential appointment.
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