U.S. taxpayers with offshore accounts should take note of the new voluntary disclosure program announced by the Internal Revenue Service. The 2011 Offshore Voluntary Disclosure Initiative (“2011 Initiative”) was announced February 8, 2011, and offers taxpayers who did not participate in the IRS’ prior offshore voluntary disclosure offering in 2009 (“2009 Program”) a second chance to come clean in exchange for reduced penalties. For those taxpayers who have already come forward, new reduced penalty structures in the 2011 Initiative are available to qualifying taxpayers who participated in the 2009 Program.
The 2011 Initiative is similar to the 2009 Program, but the IRS has made some significant changes, including: (1) extending the period covered by the voluntary disclosure to eight years, i.e., tax years 2003 – 2010; (2) increasing the flat-rate penalty assessed on the highest aggregate balance of offshore accounts (the “Offshore Penalty”) to 25 percent from 20 percent; (3) introducing two new reduced penalty structures which may lower the Offshore Penalty to five percent or 12.5 percent for certain taxpayers; and (4) implementing a strict deadline requiring interested taxpayers to submit all filings, as well as payment for all taxes, interest and penalties to the IRS on or before August 31, 2011.
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