- Days left

IRS Offers Final Amnesty Program for Taxpayers Hiding Money Offshore

Amnesty offer to Americans with off-shore accountsThe IRS has announced a special voluntary disclosure initiative to return offshore money back into the U.S. tax system and help taxpayers with offshore accounts get compliant. The new initiative is called the 2011 Offshore Voluntary Disclosure Initiative (OVDI) and is similar to the 2009 Offshore Voluntary Disclosure Program (OVDP), the last such amnesty program for taxpayers with international accounts.

U.S. taxpayers are generally required to report their worldwide income on their tax returns, even if that income is not taxable. This is different from the rules in many other countries.In addition to reporting income, the Report of Foreign Bank and Financial Accounts (FBAR) requirements state that each "U.S. person" has to file a separate report if he or she has an interest in, signature or other authority over one or more bank, securities, or other financial account in any foreign country, if the total value of the accounts exceeds $10,000 at any point in the year. This report, often referred to as an "FBAR" form, must be filed for every year the accounts exceed that $10,000 threshold. For purposes of reporting, the accounts need not be permanent and include convenience and joint accounts in foreign countries set up for work, study or immigration purposes.

For purposes of the FBAR requirements, a "U.S. person" means a citizen or resident of the United States, or a person in and doing business in the United States. It is not limited to individuals and includes partnerships and corporations. You may be a "U.S. person" if you are in the country even for a short time.

Other reporting requirements may also apply, such as forms that must be filed by taxpayers
with interests in foreign companies. It's important to keep in mind that these requirements don't just apply to international business moguls: U.S. persons involved in international family businesses or rental properties may also be subject to the reporting requirements.

Outside of the amnesty program, there are significant financial penalties for failing to comply with income and account reporting laws. There is also a danger of criminal prosecution.

Taxpayers who comply with the amnesty program may be eligible for a significant reduction in penalties. Additionally, taxpayers who comply can avoid criminal prosecution. To participate in the disclosure program, taxpayers must file all tax returns and pay taxes, interest and accuracy-related penalties for the tax years 2003 through 2010. The deadline for the initiative is Aug. 31, 2011.

Taxpayers who have been notified by the IRS that they are currently being investigated for not previously revealing foreign accounts or undisclosed foreign entities will not be eligible for the program. This includes taxpayers under civil or criminal investigation. Similarly, taxpayers who previously participated in the 2009 amnesty program are not eligible for the 2011 program.

The IRS plans to continue to enforce tax secrecy laws and has increased the resources available to find taxpayers with offshore accounts. IRS Commissioner Doug Shulman has made offshore account reporting a priority in his administration following high profile (and highly successful) investigations at the Swiss-based bank, UBS, and British-based bank, HSBC.

Shulman encourages taxpayers to come forward -- before the IRS finds them -- saying:

"As we continue to amass more information and pursue more people internationally, the risk to individuals hiding assets offshore is increasing. This new effort gives those hiding money in foreign accounts a tough, fair way to resolve their tax problems once and for all. And it gives people a chance to come in before we find them."

The decision to offer a second amnesty program follows continuing interest from taxpayers with foreign accounts. The first special voluntary disclosure program, in 2009, resulted in 15,000 voluntary disclosures. In contrast, since that time, only about 3,000 taxpayers have come forward.

The IRS has dedicated a section on its website to the program with information in eight languages -- Chinese, German, Korean, Spanish, Farsi, Hindi, Russian and Vietnamese. Taxpayers can find a series of questions and answers on the site as well as details on how to make a voluntary disclosure; taxpayers are encouraged to contact the IRS or their tax professional for more information about the program.

The key to the second (and final) amnesty program is becoming compliant. The IRS is serious about offshore accounts and has said publicly that things are going to get more, not less, difficult for taxpayers who fail to take advantage of the program. Shulman warns that this is the last chance for affected taxpayers to get a break. In his statement, Shulman noted:

"As I've said all along, the goal is to get people back into the U.S. tax system. Combating international tax evasion is a top priority for the IRS. We have additional cases and banks under review. The situation will just get worse in the months ahead for those hiding assets and income offshore. This new disclosure initiative is the last, best chance for people to get back into the system."

Increase your money and finance knowledge from home

Goal Setting

Want to succeed? Then you need goals!

View Course »

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

TurboTax Articles

Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Add a Comment

*0 / 3000 Character Maximum