TaxAlerts Tax Article
March 2011 | Written by: Karen Reed, EA
Taxpayers with undisclosed income in hidden offshore bank accounts have a second chance to come forward, the IRS announced last month. The new program is meant to encourage tax evaders to get back into the system voluntarily rather than face the possibility of higher penalties and criminal prosecution. The first initiative attracted 15,000 voluntary disclosures before it closed in October of 2009. Most of the 3,000 individuals who have come forward since that time will be eligible for the new program.
The 2011 program has a higher penalty structure than the 2009 Offshore Voluntary Disclosure Initiative. Most participants will be required to pay a penalty of 25 percent of the total amount they had in foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Reduced penalties of five and 12.5 percent will be available to taxpayers who meet certain conditions. Back taxes, up to eight years of interest, and accuracy and delinquency penalties also will be assessed.
Taxpayers who participate in the 2011 Offshore Voluntary Disclosure Initiative are required to file all original and amended tax returns with payments for taxes, interest and accuracy–related penalties by August 31, 2011. Those who have a genuine inability to pay the full amount by the due date generally will be allowed to work out other payment arrangements with the IRS.