The IRS has announced a second offshore Voluntary Disclosure initiative. This time, the deal is not as good as the first round, but could certainly outweigh the costs of prosecution.
*Update 2017 – There are still options available if you need to disclose offshore accounts. Learn about them here.*
In the first round that ended October 15, 2009, taxpayers only had to pay 6 years worth of unreported taxes (2003-2008), plus interest, along with a 20% FBAR penalty on the highest account value.
The new deal has taxpayers have to paying 8 years worth of unreported taxes (2003-2010), plus interest. In addition, a potential 20% accuracy-related penalty, along with a now higher 25% FBAR penalty.
The deadline for this program is August 31, 2011.
Who should be concerned
As we have been successfully finishing up with the IRS with clients from the the first round of Voluntary Disclosure, I have learned a lot about what the IRS has learned, and who they have targeted. This is who needs to pay particular attention:
- Of the 4450 names the IRS requested, the IRS sought names of account holders they believed they would have had a hard time finding through other means. So what does that mean? The IRS requested accounts held by US-owned foreign holding companies. So if you have signatory authority in a foreign holding company which held unreported offshore accounts — you need to start thinking costs v. benefits of voluntary disclosure.
- The IRS requested and received a treasure trove of names from advisers (CPAs, Attorneys, Financial Planners) who may have assisted their clients in hiding money offshore. These folks have a lot to be worried about; Someone who even suggested an offshore account to someone else, should make sure that they have no unreported sources of foreign income.
- Of the 4450 names from UBS, the IRS was NOT primarily concerned with account size. The IRS figured they could catch those bigger accounts through other methods — namely bank transfer records.
- Well, no one is all that safe. There are many ways the IRS can figure out if a foreign account exists. People with duties of confidentiality have been sharing information with the IRS.
If you're concerned, and are unsure if you should get into a disclosure program, contact us. We can help. Call us at 888-727-8796 or email info@irsmedic.com.
