On June 2, the IRS updated the frequently asked questions (FAQ) related to the 2011 Offshore Voluntary Disclosure Initiative (OVDI). The OVDI, which was originally announced February 8, 2011, provides an opportunity for taxpayers to disclose previously unreported offshore assets in exchange for a 25% penalty (or in some cases, a 5% or 12.5% penalty) on the highest amount of the assets between 2003 and 2010, payment of unreported taxes and interest for the tax years 2003 through 2010 and various other civil penalties.

The updated FAQ’s provide(i) for a 90-day extension period for taxpayers wishing to comply that are unable to make the August 31 deadline, so long as the taxpayer makes a good faith attempt to comply and can explain which items are missing and why; (ii) compare in detailed explanations, the penalties that would potentially apply to taxpayers participating in the initiative versus with those penalties that would potentially apply to taxpayers that “opt-out” of the initiative; and (iii) and most importantly, provide an additional reduced penalty for US persons who are living outside the US.