Mineola, NY – Many of our clients have already taken advantage of the IRS Offshore Voluntary Disclosure Program, which provides taxpayers with an opportunity to report previously undisclosed foreign accounts and entities without criminal penalties and with substantially reduced civil penalties. In January the IRS announced that it will revive the program. Under the current program there is no specified application deadline; however, the IRS may end the program or change its terms at any time.
Under the new program, a taxpayer will be required to pay taxes on all previously unreported income from applicable foreign assets and accounts for the eight (8) tax years prior to the disclosure along with interest and civil penalties on such taxes. In addition, a taxpayer will be required to pay a 27.5 percent penalty on the highest account balance during that eight (8) year period. (Note, the October 2009 and September 2011 programs provided for 20 percent and 25 percent penalties respectively). As under the previous programs, the penalty may be reduced to 12.5 percent or 5 percent in certain limited situations. If the foreign account is identified by the IRS outside of this program, the penalties can be as high as 50 percent of the total balance of the foreign account per year, and therefore can far exceed the taxpayer’s assets in the account if assessed for each year in which the otherwise applicable statute of limitations remains open. In addition, the taxpayer would face the possibility of criminal prosecution.
Please contact one of the attorneys in the Tax Law Group at Meltzer, Lippe, Goldstein & Breitstone, LLP for more information on the new Offshore Voluntary Disclosure Program.