August 31 Deadline For Participating In IRS Offshore Voluntary Disclosure Initiative Is Rapidly Approaching

On August 31, 2011, the window of opportunity to participate in the Internal Revenue Service's 2011 Offshore Voluntary Disclosure Initiative (OVDI) will close. The OVDI program is a second amnesty program designed to encourage taxpayers with undisclosed foreign bank accounts to come into compliance with U.S. tax and foreign bank account reporting laws and avoid possible criminal prosecution. This program follows a highly successful amnesty offered during 2009 which attracted over 15,000 participants.

In a recent news release, the IRS reminded taxpayers of the imminent deadline and warned that individuals with secret foreign bank accounts who fail to take advantage of this program will be treated more harshly than those who voluntary come forward now. "The time has come to get back into compliance with the U.S. tax system, because the risks of hiding money offshore keeps going up," said IRS Commissioner Douglas Shulman. "Our goal is get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems."

The 2011 OVDI framework generally requires that participants pay a penalty of 25 percent of the highest aggregate balance in their foreign bank accounts during the 2003 to 2010 time period. Under limited circumstances, this penalty may be reduced to either 12.5 or 5 percent. Participants must pay back taxes and interest for the period 2003 through 2010, as well as accuracy-related and/or delinquency penalties of 20 percent of the taxes due. Participants must also file all original and amended tax returns, and pay all taxes, interest, and penalties by the August 31 deadline, although the IRS has announced that participants who act in good faith and with due diligence may request a 90-day extension if more time is needed.

Individuals who continue to hide assets offshore and...