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Second Chance for Voluntary Disclosure

The IRS announced its second voluntary disclosure program for taxpayers to disclose unreported foreign accounts, including income and expenses related to the accounts. By participating in this program, taxpayers with unreported foreign accounts can avoid criminal prosecution for unpaid taxes. To take advantage of voluntary disclosure, taxpayers must file or amend tax returns to include formerly unreported foreign income. The taxpayers must also file Forms TD F 90-22.1 (Report of Foreign Bank and Financial Accounts) and pay all taxes, penalties, and interest by August 31, 2011 for tax years 2003 through 2010. According to IRS Commissioner Doug Shulman, “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.”

Who is eligible to participate?

The voluntary disclosure program is available for all taxpayers, including individuals, corporations, partnerships, and trusts. However, taxpayers currently under examination or criminal investigation are not allowed to participate in the program. Any taxpayer who has already made a “quiet disclosure” by filing amended returns and paying the additional tax, interest, and penalties should consider this program. Taxpayers making quiet disclosures who do not participate in the program risk being examined and having criminal charges brought against them.

How much will I owe?

Taxpayers participating in this program will owe a 25% penalty on the highest aggregate account balance between 2003 and 2010. If the aggregate value of the previously unreported accounts is less than $75,000 at all times between 2003 and 2010, the penalty is reduced to 12.5%. Taxpayers will also owe interest on the tax deficiency as well as a late-payment penalty of 0.5% per month, capped at 25%.

According to Doug Shulman, this will likely be the last program of its kind, so taxpayers should take advantage of this opportunity. “The situation will 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 in the system.”

For further information please contact Jennifer Zamarin at jzamarin@BlackmanKallick.com or 312-980-3317 or your Blackman Kallick representative. Our thanks to Justin Kleckner for his contribution to this article.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.