On February 8, 2011, the IRS announced a second voluntary disclosure program for taxpayers who have not disclosed their foreign bank account holdings. The first disclosure program occurred in 2009. When the program closed on October 15, 2009, there were 15,000 disclosures. The new initiative – called the “2011 Offshore Voluntary Disclosure Initiative” will be similar to the 2009 program, but there will be some changes.
- The disclosure period is two years longer. It covers 2003 through 2010
- The penalty is higher. It is 25% of the highest aggregate balance during 2003 through 2010. The penalty rate during the 2009 program was 20%.
- Taxpayers who participate in the program must file all original or amended tax returns and pay the taxes, interest and accuracy related penalties for these eight years by August 31, 2011.
- In addition the foreign bank account disclosures – form TD F 90-22.1 need to be filed as well.
- In limited situations taxpayers may qualify for a lower 12.5% or 5% penalty rate.
In a recent news release, Doug Shulman, the IRS Commissioner, said “Tax secrecy continues to erode. We are not letting up on international tax issues and more is in the works. For those hiding cash or assets offshore, the time to come in is now. The risk of being caught will only increase.”
This is a tougher program than the 2009 voluntary disclosure program, but it still presents a way to reduce penalties and reduce the chance of criminal prosecution.