On January 9, 2012, the Internal Revenue Service (“IRS”) reopened an Offshore Voluntary Disclosure Initiative (“OVDI”) to give U.S. taxpayers with offshore accounts a third opportunity to disclose such accounts, pay any taxes and penalties due, and avoid criminal prosecution. With the opening of this third OVDI, the IRS remains committed to identifying taxpayers who have undisclosed offshore accounts and those involved in offshore tax evasion. The IRS is currently conducting a civil investigation of at least 11 confirmed Swiss banks, and some sources estimate the number is closer to 21. The Department of Justice (“DOJ”) has joined the IRS in pursuing criminal charges against these Swiss banks.
A U.S. person who has authority over or interest in a foreign financial account is required to disclose the account to the IRS, if the aggregate value of foreign accounts equals or exceeds $10,000. Accounts are disclosed by filing the FBAR form filed with the Treasury Department. In addition, the IRS issued a new reporting form, Form 8938, “Statement of Specified Foreign Financial Assets”. This form is required to be attached to an individual income tax return (Form 1040) for all tax years beginning with the 2011 tax year. Individuals who own certain specified foreign financial assets may need to file this new Form 8938.
For the eligible taxpayer, the 2012 OVDI offers clear benefits to encourage taxpayers to disclose offshore accounts rather than risk IRS detection. Given the potential for extremely high penalties and criminal prosecution that could be involved with non-disclosure, taxpayers who are eligible to participate in the 2012 OVDI would be well advised to consult with an attorney in connection with the decision regarding whether to enter the 2012 OVDI. Handler Thayer, LLP has significant experience in international transactions and assisting taxpayers that participated in the 2009 and 2011 voluntary disclosure programs. We are well-positioned to assist taxpayers in all facets of participation in the 2012 OVDI. Please contact us if you need assistance or have any questions regarding this opportunity
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