2011 IRS Offshore Voluntary Disclosure Initiative Deadline Fast Approaching
The United States Internal Revenue Service (IRS) is offering those with undeclared offshore bank accounts the opportunity to participate in its 2011 Offshore Voluntary Disclosure Initiative (OVDI). Taxpayers with undeclared foreign accounts will not face criminal prosecution although they will be liable for taxes, penalties and interest. The civil penalties for failure to file the yearly report disclosing offshore accounts will be significantly reduced, which together with avoiding criminal prosecution constitutes significant reasons to enter the 2011 Offshore Voluntary Disclosure Initiative.
The IRS recently announced an extension of time to complete the requirements of the OVDI. When originally announced, the IRS required that the program be completed by September 9th, 2011. That deadline for completion can be extended by 90 days upon showing of a good faith effort to obtain the necessary documentation. The IRS recognized that it is often difficult and time consuming to get records from offshore financial institutions. The new time frame to complete the program still requires that the application to enter the 2011 Offshore Voluntary Disclosure Initiative be submitted by September 9th, 2011.
Penalties for Not Declaring Can Be Severe
The IRS and Department of Justice have filed law suits seeking to force some offshore banks to disclose U.S. customers. Because of this pressure the IRS has and will receive account holder information. Taxpayers who have not declared offshore accounts and income from offshore accounts face serious penalties - even criminal prosecution. Some possible civil penalties include:
- For failing to declare a financial interest in a foreign account exceeding $10,000 at any time during the year, the penalty can be the greater of $100,000 or 50 percent of the highest account balance per year
- For failure to disclose offshore income, the taxpayer can face a civil fraud penalty of 75 percent of the unpaid tax
In addition, of course, those who fail to disclose offshore accounts and income face prosecution for tax evasion. A conviction for tax evasion can bring a prison sentence of up to five years and a $100,000 fine for each year. A conviction for filing a false return can bring a prison sentence of up to three years and a $100,000 fine.
Successful completion of the OVDI not only avoids criminal prosecution, but also significantly reduces the civil penalties which may be imposed without the OVDI.
An Attorney Can Help
If you have an undeclared offshore account - whether in the Cayman Islands, Europe, South America or Asia - contact an experienced criminal tax lawyer. An attorney can assess your case, outline your options, and help you protect your rights. For more information about whether you would benefit from participating in the 2011 Offshore Voluntary Disclosure Initiative, contact an attorney today.