The IRS announced yesterday that it has opened a second voluntary disclosure program for taxpayers who have undisclosed foreign financial accounts. In exchange for disclosure of unreported offshore accounts, the IRS offers reduced penalties. This progam is scheduled to run through August 31, 2011.
In a similar 2009 program, approximately 15,000 taxpayers came forward, resulting in collections of approximately $400 million. Our office assisted several taxpayers with voluntary disclosure, and we found that they wound up paying approximately 50% of the highest account balance in the account during the preceding six years. Although certainly painful, the penalties were substantially lower then they would have been absent the disclosure, and the taxpayers avoided prosecution.
Under the new framework, taxpayers are required to pay tax on the unreported income for the years 2003 through 2010, a penalty of 25% of the highest aggregate account balance during that period, and interest. In order to participate in the program, taxpayers must file amended returns for all years and include payment for taxes, interest and penalties. The IRS has posted a penalty computation worksheet on its website. The program ends August 31, 2011. All paperwork must be received by the IRS by that date.
If you have an undisclosed foreign financial account, we urge you to participate in this program. It is rare that the IRS gives taxpayers a second bite at the apple. This may be your last chance to come forward. If you don't take advantage of this program, and your undisclosed accounts are discovered by the IRS, the consequences will be devastating. The tax, penalties, and interest will wipe out the entire account balance, and, it is possible that you will also go to jail.
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