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February 11th, 2011
IRS Offers New Tax Amnesty Program for Offshore Account Holders
There’s important news for people who maintain funds in offshore accounts. The IRS announced this week the 2011 Offshore Voluntary Disclosure Initiative ("OVDI") - a new program designed to encourage people to bring offshore assets into the U.S. tax system. The initiative more or less reprises a 2009 program under which 15,000 taxpayers disclosed offshore accounts.
The OVDI may be attractive to particular taxpayers who have failed to report both the income from, and the existence of, offshore accounts on their federal income tax return and appropriate disclosure form. First, successful disclosure under OVDI avoids potential criminal prosecution for unreported accounts. Second, OVDI civil penalties are substantially lower than civil penalties under the Bank Secrecy Act. Under the OVDI framework, individuals must pay "a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period," according to a recent IRS notice. And some taxpayers will be eligible for reduced penalties (e.g., five or 12.5 percent penalties) depending on the amount of funds held overseas. The OVDI also requires participants to pay back-taxes and interest for up to eight years as well as accuracy-related and/or delinquency penalties. On the other hand, civil penalties under the Bank Secrecy Act for willful violations of the reporting provisions are equal to the greater of $100,000 or 50% of the balance of funds in an unreported foreign account for each year since 2004. Taxpayers considering the OVDI will therefore need to weigh the prospective OVDI penalties against the risk of detection and criminal or civil prosecution by an emboldened IRS under existing law. The OVDI will be available through August 31, 2011.
If you have any questions about the OVDI or its application to your situation, or other tax, securities, or regulatory matters, please contact Brian Maas at (212) 705-4836 or firstname.lastname@example.org, or Bernard C. Topper, Jr. at (212) 826 5547 or email@example.com.
Other Regulatory Alerts
Gift Cards in Advertising Promotions and New York Sales Tax
Does the value of a gift card offered as part of an advertising promotion reduce the taxable receipts from a sale for New York sales tax purposes? It is an important question for advertisers. Under-collection of sales tax can leave you liable for the underpayment, while over-collection can serve as the basis for a class action. Read more.
November 20 2018
IRS Final Regulations Clarify Charitable Contribution Substantiation Requirements
Tax deductions for charitable contributions require the satisfaction of certain substantiation requirements. Read more.
August 28 2018
Claiming the New 20% Pass-Thru Business Deduction—IRS Proposed Regulations Provide Guidance on Meaning of “Specified Service Business”
Background. On August 8, 2018, the IRS issued proposed (not final, but taxpayers can rely on them currently) regulations (the "Regulations") intepreting the 2017 Tax Cuts & Jobs Act's new rule under which an individual taxpayer may deduct up to 20% of his income from a domestic business operated as a sole proprietorship or through a partnership (including an LLC taxed as a partnership) or S corporation (a "pass-thru business"). With this 20% deduction, the effective federal marginal tax rate on an individual taxpayer's qualified business income (assuming he is otherwise subject to the maximum 37% tax rate) is 29.6%. The deduction is available through 2025. Read more.
August 15 2018