Jump to Navigation

Offshore Voluntary Disclosure Initiative Updates FAQs, Closes Loophole

Though the 2012 Offshore Voluntary Disclosure Initiative (OVDI) announced by the IRS in January is substantially similar to the 2009 and 2011 program, there are key differences that are important to understand. Some of these differences were further clarified in a recent update to the OVDI frequently asked questions page on the IRS website.

Specifically, the updates include:

  • Beginning with tax year 2011, taxpayers choose not to disclose will also be subject to a penalty for failing to file Form 8938, Statement of Specified Foreign Financial Assets, along with their annual income tax return. The penalty for not filing this information return is $10,000, with an additional $10,000 added for each month the failure continues, beginning 90 days after a taxpayer is notified of the delinquency. The maximum penalty for failure to file Form 8938 is $50,000.
  • Undisclosed income from domestic sources must be disclosed in addition to income related to offshore accounts and assets.
  • Spouses may participate either jointly or separately.
  • New procedures are being drafted to assist taxpayers/OVDI participants who have a retirement or pension plan in a foreign country. More specifically, taxpayers who have a Canadian registered retirement savings plan, registered retirement income fund, or other similar Canadian plan and did not previously make a timely election to defer U.S. income tax on income earned by those plans, will be able to do so through these procedures.

Finally, the FAQs have been revised to close a loophole that was taken advantage of in the previous disclosure programs. Under existing law, a taxpayer may appeal a foreign government's decision to disclose their financial account information in that foreign government's court - thereby preventing their account from being reported to the U.S. government while the appeal is pending. However, a U.S. taxpayer is required to inform the U.S. Attorney General that they have taken advantage of this appeal right. Taxpayers who fail to do so can become ineligible to participate in the 2012 OVDI. Taxpayers who have accounts at financial institutions that have taken advantage of this loophole may also be ineligible due to U.S. government actions in connection with those institutions.

These revisions and updates to the 2012 OVDI indicate that the program is being refined in accordance with issues that arise as disclosures from the previous programs are processed. With over $5 billion collected from these programs so far, taxpayers can expect to see further refinements as the IRS attempts to bring every U.S. tax dollar back into the system.

4 Comments

I believe that is among the most important information for me.
And i am satisfied studying your article. But should remark on some general things, The website style is wonderful, the
articles is truly great : D. Good task, cheers

Leave a comment
Comment Information

Contact Us

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close
Visit Our Tax Law Website Subscribe to This Blog's Feed
FindLaw Network