The Internal Revenue Service (IRS) is currently operating an Offshore Voluntary Disclosure Program (OVDP). This program is structured similarly to the Offshore Voluntary Disclosure Program (OVDP) offered in 2009 and the Offshore Voluntary Disclosure Initiative (OVDI) offered in 2011. The program allows U.S. taxpayers with undisclosed interests in foreign financial accounts to come into full tax compliance.
When entered into the program, taxpayers agree to file amended tax returns and Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), for a “look-back period” of up to eight previous tax years, pay all applicable taxes with a 20 percent accuracy-related penalty on such tax plus interest, and pay an “offshore-related” penalty of 27.5 percent of the highest foreign account balance/asset value that existed during the look-back period.
When a taxpayer truthfully, timely, and completely complies with the Offshore Voluntary Disclosure Program, the IRS will not recommend criminal prosecution to the Department of Justice. Furthermore, taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the civil fraud penalty and foreign information return penalties.
Unlike the 2009 OVDP and the 2011 OVDI, there is no set deadline for taxpayers to apply to the 2012 OVDP. However, the terms of this program could change at any time going forward. Furthermore, the program could end at any time.
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