Tax Bulletin Feb 2011: IRS Offshore Account Disclosure Initiative

Second (and likely final) IRS Offshore Account Disclosure Initiative
Action Required by August, 31, 2011

By Christopher J. Loughran, Shareholder, Director of Tax

Overview
The IRS recently announced another “amnesty” type of program, available until August 31, 2011, for people with previously unreported offshore accounts. The prior disclosure program, which we summarized in our July 2009 tax bulletin, expired in the fall of 2009. The new program may best be summarized as more punitive than the 2009 program, but participation is likely to obtain a better result as compared with the result if a taxpayer is caught by the IRS without being in full compliance. “Being in full compliance” would mean that offshore accounts have been timely disclosed annually to the IRS on all required forms, all related income was fully reported on the appropriate U.S. income tax return, and all related tax was fully paid. More detail regarding participation is provided below, but anyone who determines the disclosure program may be appropriate for their circumstances should obtain legal counsel before contacting the IRS, since disclosure involves the IRS Criminal Investigation Division, which is not obligated to accept taxpayers into the program depending on the facts submitted.

Also noted below for taxpayers who have merely failed to file certain information returns (but have paid all tax on all offshore accounts), is helpful clarification from the IRS that these forms can also be filed without penalty up to August 31, 2011. Such filings are not technically part of the disclosure program, as explained more fully in the full version.

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