Amnesty Offer For Offshore Accounts
In 2009, the IRS created an amnesty program that let taxpayers confess their sins about offshore accounts. The program--known as the Offshore Voluntary Disclosure Program (OVDP)--has been successful. And now the IRS has tweaked the rules and opened the doors to more taxpayers.
Since 1969, taxpayers owning interests in, or signature authority over, foreign accounts have had to disclose them by filing a Report of Foreign Bank and Financial Accounts by June 30 of the subsequent year. For many years, it has been commonplace for investors to dodge taxes (illegally) by hiding assets in foreign banks shrouded in secrecy. Under the Foreign Account Tax Compliance Act (FATCA), taxpayers no longer can avoid disclosure of their foreign accounts by such foreign banks .
Under the prior iterations of the amnesty program, taxpayers were assessed a penalty equal to 20%, 25% or 27.5% of the highest aggregate balance in the unreported foreign bank accounts or the value of their foreign financial assets during the past eight tax years. The OVDP also requires taxpayers to file amended income tax returns and FBARs. Finally, they must pay back taxes, interest, and any applicable IRS penalties thereon.
1. Streamlined procedures. These procedures are now available to a wider population of U.S. taxpayers living outside the country and, for the first time, to some U.S. taxpayers who live here. The changes include:
- Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year;
- Eliminating a required risk questionnaire; and
- Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.
For eligible U.S. taxpayers residing outside the U.S., all penalties will be waived. For eligible U.S. taxpayers residing in the U.S, the only penalty will be a miscellaneous offshore penalty equal to 5% of the foreign financial assets resulting in the tax compliance issue.
2. OVDP modifications. The IRS also made important modifications to the OVDP, including:
- Requiring additional information from taxpayers applying to the program;
- Eliminating the existing reduced penalty percentage for certain non-willful taxpayers in light of the expansion of the streamlined procedures;
- Requiring taxpayers to submit all account statements and pay the offshore penalty at the time of the OVDP application;
- Enabling taxpayers to submit voluminous records electronically rather than on paper; and
- Increasing the offshore penalty percentage from 27.5% to 50% where accounts were held in an institution publicly identified as under investigation by the IRS or the Department of Justice.
The OVDP may be an appropriate recourse for wayward taxpayers. Those who have been evading taxes illegally are urged to come forward. The alternative, should the IRS come knocking on your door, could include up to 300% FBAR penalties and criminal prosecution.
© 2019. All Rights Reserved.
- FBAR Penalty Can Run Into Millions
- Social Security: Taxes In And Out
- Taking RMDs Into Your Own Hands
- Tapping Plan Early And Penalty-Free
- A Social Security Benefit Calculator? It's Not Foolproof
- Should You Put A PIG In Your Pen?
- Keeping A 529 Plan Rolling Along
- Five Financial Vows For Newlyweds
- Fill Up Tax Brackets To The Brim
- When It Pays To ID Security Sales
- What To Do After Your Bucket List
- Why Roth IRAs Are Still Red-Hot
- Want To Get A Copy Of Your Credit Report? It's Free!
- Be On The Lookout For Crimes Involving An Elder Fraud
- Marylanders: Live Longer To Leave More For Your Heirs