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October 20, 2014


IRS Brings Clarity to a Limited-Amnesty Program for Offshore Accounts

The Internal Revenue Service announced changes to one of its limited-amnesty programs for U.S. taxpayers with undeclared offshore accounts. The revisions are an attempt to “streamline procedure,” which was announced in June and could offer relief to taxpayers who weren’t intentionally hiding money abroad.

Participants in the streamlined program who live in the U.S. are eligible for a 5% penalty on the balance of undisclosed accounts, while participants living outside the U.S. may not face any sort of penalization. This is a far cry from the 27.5% penalty taxpayers in a different program who disclose offshore accounts will face.

Experts suggest the clarifications can be both good and bad for U.S. taxpayers participating in the streamlined program. “While the clarification is a step in the right direction, there will still be taxpayers who misinterpret the IRS’ message and end up receiving harsher treatment than they initially anticipated,” says Catherine Rude, an international tax attorney in Fort Worth, Texas.

The guidance was issued in question-and-answer format. Seven new questions help U.S. residents identify what assets are and are not subject to the 5% penalty.

One new question brings clarity to U.S. taxpayers residing outside the U.S. in regards to residency details. It holds that many Canadian “snowbirds” who regularly spend several months a year in the U.S. and are delinquent U.S. taxpayers – whether they are aware or not – will fail to qualify for a zero penalty.

Another clarification makes it more difficult for people who hope to avoid a penalty in the streamlined program. U.S. taxpayers who don’t owe taxes but failed to file paperwork will have to explain to the IRS why they didn’t. If the IRS finds the explanation to be sufficient, the person in question will escape a penalty.

Source: Saunders, Laura, “IRS Revises a Limited-Amnesty Program for Offshore Accounts,” The Wall Street Journal, October 11th, 2014

Offshore Accounts/International Tax Disputes