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IRS Foreign Bank Deposit Amnesty Offshore Voluntary Disclosure Initiative

Most U.S. taxpayers are now aware of all of the new requirements for U.S. Information Returns that will alert the Internal Revenue Service to the amounts and nature of most foreign assets and foreign bank deposits owned by U.S. taxpayers.  An Information Return is not a tax return.  It simply notifies the Internal Revenue Service of foreign assets; both individual and corporate.

However, the failure to file information returns and disclose various foreign assets to the Internal Revenue Service can result in very severe and expensive tax penalties for U.S. taxpayers.

In order to avoid these significant penalties, the Information Returns must be timely filed. For those U.S. taxpayers who have not timely filed the proper U.S. tax returns and/or the proper U.S. Information Returns; the Internal Revenue Service has provided an Overseas Voluntary Disclosure Initiative (“OVDI” or “Amnesty Program”).  This permits U.S. taxpayers with foreign bank deposits and other assets that have not been disclosed and/or taxed to pay their taxes for prior years and avoid serious penalties.

Under this “Amnesty Program”, United States taxpayers may voluntarily disclose their unreported offshore assets without being subject to any criminal liability and limiting the U.S. taxes and civil penalties that could be applied.

However, if the I.R.S. is investigating a Taxpayer, it is too late for the Taxpayer to enter the Amnesty Program.

This Amnesty Program can be expensive and includes a high penalty on unreported bank deposits.  The Taxpayer must pay the proper tax on all U.S. unreported income for the last eight years and pay a 20% accuracy penalty for unreported taxes plus interest.

Reduction of Penalties – The “Opt Out” Program

Under certain circumstances the penalties may be reduced.   If this is the case, the Taxpayers that have been permitted to enter Amnesty Program, may “Opt Out” of the Amnesty Program if they believe lower penalties should be applied under the Taxpayer’s special circumstances.

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