New IRS Guidelines on Reporting of Offshore Accounts

The Internal Revenue Service issued new guidelines in early June regarding its voluntary disclosure program to mitigate penalties for failing to report income in Swiss bank accounts and other offshore locations to avoid tax liability. Some U.S. taxpayers will have 90 days beyond the August 31, 2011, deadline to disclose foreign bank accounts.

The IRS is offering the extension to taxpayers who have made good faith efforts to assess taxes and penalties related to the Report of Foreign Bank and Financial Accounts (FBAR) (Form TD F 90-22). Applications for the 90-day extensions must include properly completed paperwork and details about missing information, why it has not been included, and what steps are being taken to secure the information.

The IRS first implemented an Offshore Voluntary Disclosure Program (OVDP) in 2009, which included a uniform penalty structure for taxpayers who reported previously undisclosed foreign assets and accounts. The agency offers three good reasons behind voluntary disclosure:

• Participants can become compliant with U.S. tax law
• They can avoid significant civil penalties
• Voluntary disclosure generally eliminates the risk of criminal prosecution

An individual’s decision to participate in the 2011 Offshore Voluntary Disclosure Initiative (2011 OVDI) requires a thorough review of income records and tax law. The complexities of any tax evasion scenario are unique to the individual taxpayer. A consultation with an experienced tax lawyer can help business owners, corporate officers and other individuals assess their legal options and the long-term implications of any strategy

Source: IRS To Let Some Bow Out Of Swiss Account Disclosure Program