Wednesday, January 18, 2012

IRS Announced Third Offshore Voluntary Disclosure Program

On January 9, 2012, the IRS announced that it is reopening the Offshore Voluntary Disclosure Program (“OVDP”) designed to bring taxpayers with direct or indirect undisclosed foreign financial accounts into compliance with United States tax laws. The IRS news release is available at: http://www.irs.gov/newsroom/article/0,,id=252162,00.html.

The 2012 program is very similar to the 2011 OVDP but has a few key differences. The maximum penalty has been raised from 25% in the 2011 OVDP to 27.5%. Unlike the prior programs, there is no set deadline for people to apply under the 2012 program; it will remain open indefinitely. However, the IRS may change the terms of the 2012 program prospectively (e.g., the IRS could increase penalties or even end the program entirely at any point). As with the 2011 ODVP, the penalty may be reduced in certain limited cases to 12.5% or 5%. Participants must file all original and amended tax returns and include payments for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

The IRS indicated that more details will be available within the next month on IRS.gov and will be updating key Frequently Asked Questions and providing additional specifics on the offshore program.

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