If you have undisclosed income through offshore accounts, time is running out to voluntarily disclose it and bring your taxes current. The IRS is winding down a voluntary disclosure program that began February 8 and will end on August 31.
The current program is actually the second voluntary disclosure arrangement conducted by the IRS. After its first program that ended in 2009 proved successful, the agency created a second program. During the first round of the offshore income voluntary disclosure, about 15,000 voluntary disclosures at banks in more than 60 countries were reported.
Under the 2011 Offshore Voluntary Disclosure Program (OVDP), taxpayers are required to pay a penalty of 25 percent of the amount in the foreign bank account in the year with the highest aggregate account balance between 2003 and 2010. Some taxpayers will be eligible for 5 or 12.5 percent penalties in certain narrow circumstances.
You must also pay back taxes and interest for up to eight years along with paying accuracy or delinquency related penalties. And you must file all original and amended tax returns by the deadline.
The IRS is stepping up its efforts to detect undisclosed accounts and income, and accountholders who don’t come forward voluntarily will face much stiffer penalties. The agency is implementing new foreign account reporting requirements and will continue its focus on banks and bankers worldwide that help U.S. taxpayers hide assets overseas.
Your accounting professional can help you enter into the voluntary disclosure program to declare your offshore assets. However, completing the filing requirements can take time, so contact your tax professional sooner, rather than later, to meet the deadline.