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Update on offshore disclosure: IRS aims for wider compliance

One of the threads we've been developing in this blog is offshore account disclosure.

In recent years, U.S. authorities have been cracking down aggressively on taxpayers who allegedly failed to meet foreign account disclosure requirements. In our May 12 post, for example, we wrote about a tax evasion case involving H. Ty Warner, the founder of "Beanie Babies" toys.

The judge gave a sentence of probation in that case rather than a prison term.

In today's post, we will take note of some of the changes that the IRS announced this week that are supposed to make offshore compliance easier for taxpayers.

One of the changes is supposed to encourage participation in a voluntary compliance program by making more taxpayers eligible whose failure to comply with offshore asset reporting requirements was not willful. For example, the IRS has removed a ceiling of $1,500 in taxes owed in order to be eligible.

In addition, the IRS announced that it would modify the requirements for participating in the Offshore Voluntary Disclosure Program (OVDP). As we discussed in our November 12 post last year, the OVDP is a limited amnesty program for taxpayers with undisclosed offshore accounts.

Under the change announced this week, the IRS will now allow taxpayers seeking to enter the OVDP to submit their records in electronic form, rather than by paper.

But the IRS also increased the potential tax penalty for failing to comply with offshore reporting requirements. The penalty was 27.5 percent of an account balance, but the IRS has now raised it to 50 percent.

Source: IRS.gov, "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come Into Compliance," June 18, 2014

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