Deadline approaching for IRS amnesty on secret offshore accounts
The deadline to participate in the Internal Revenue Service’s 2011 Offshore Voluntary Disclosure Initiative (OVDI) is less than a week away. U.S. citizens with undisclosed foreign bank accounts have until Aug. 31 to become compliant and avoid stiffer penalties and possible prosecution.
May be the last amnesty offered
The OVDI is the second, and possibly last, amnesty program offered by the U.S. government in its crackdown on U.S. citizens, residents and green card holders with undisclosed bank accounts abroad. The IRS calls this the “last best chance” for citizens to come clean and pay taxes and penalties owed before the agency issues its stiffest penalties and potential criminal charges.
IRS Commissioner Douglas Shulman said:
“The time has come to get back into compliance with the U.S. tax system because the risks of hiding money offshore keeps going up. Our goal is get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems.”
The IRS offered a similar program to taxpayers with secret foreign accounts in 2009. More than 15,000 people came forward to take advantage of that program.
Top priority for DOJ Tax Division
The Tax Division for the U.S. Department of Justice has stated that its top priority is to “combat” non-compliant tax payers with secret accounts abroad. The statement concluded that, according to a 2008 Senate report, such accounts “cost the U.S. Treasury at least $100 billion annually.”
Swiss banking laws broken
In 2009 UBS, a prominent Swiss financial institution headquartered in Zurich, Switzerland, paid the U.S. $780 million to settle tax evasion prosecution. The financial records of 4,450 American UBS clients were handed over to Washington, effectively puncturing the laws protecting Swiss bank secrecy. Since then, similar probes have come from Germany, Italy and Britain.
The Foreign Account Tax Compliance Act (FACTA) was adopted by the U.S. in March of 2010 to prevent Americans from evading taxes by hiding assets in offshore bank accounts. The FACTA forces non-U.S. banks to disclose information regarding accounts held by citizens of the U.S., so taxpayers with secret offshore accounts are far more likely to be found out today than in the past.
The 2011 OVDI program requires participants to pay penalties of 25 percent of the highest combined balance of all off-shore accounts from 2003 to 2010. This amount may be reduced to 12.5 percent, or even 5 percent, depending on different sets of criteria. Participants will also be required to file tax returns for those years and pay all taxes. A 90-day extension may be granted for participants acting in good faith and making a concerted effort to comply.