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USA: A third chance to get it right with IRS

In 2009, when the IRS established the first of two recent Offshore Voluntary Disclosure Programs ("OVDP") for U.S. taxpayers with undeclared foreign accounts, IRS Commissioner Doug Shulman had said that his "goal has always been clear -- to get those taxpayers hiding assets offshore back into the system." The 2009 and 2011 OVDP brought in an estimated 33,000 taxpayers and over $4.4 billion.Because of the success of the two programs, the IRS announced on Monday, January 9, 2012, that it will "reopen the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes." In News Release IR-2012-5, Mr. Shulman stated, " As we've said all along, people need to come in and get right with us before we find you. We are following more leads and the risk for people who do not come in continues to increase."

Taxpayers who have been sitting on the fence, unable to decide whether to participate, or who did not act in time to meet the deadlines of the two previous programs may now participate in this OVDP without a particular deadline. However, the IRS stated in their announcement that "the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers - or decide to end the program entirely at any point."

While the terms of this OVDP are very similar to the 2011 OVDP, the new penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure, which is up from the 25 percent penalty imposed under the 2011 program.

As before, some taxpayers will be eligible for 5 or 12.5 percent penalties if, for instance, they did not cause the accounts to be opened (i.e., inherited the accounts), or if the accounts or assets held were below a $75,000 threshold in each of the years covered by the program.

The IRS promises that additional details regarding this latest offshore initiative will be posted by next month on their website. Please contact your WithumSmith+Brown tax advisor if you would like to receive details on this program as they become available.

For further information please contact your local HLB member firm or contact the WS+B National Tax ServicesGroup at +1 609.520.1188. Alternatively, send an email to  This e-mail address is being protected from spambots. You need JavaScript enabled to view it if you have any questions.

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