Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

   
Resources - Tax Center - Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York
     
 

Offshore Disclosure – New Program No Loopholes

 
 

Do you have an offshore bank account or assets? Do you have signatory authority over foreign assets or financial accounts? If so, Boris Benic & Associates wants you to know that the IRS has implemented a new Offshore Voluntary Disclosure Program (OVDP). The new program announced earlier this year provides taxpayers with assets and accounts held in offshore accounts the opportunity to “come clean” with the IRS and face limited fines and penalties. The program contains key changes from the 2011 initiative including an increased penalty framework and additional filing requirements. Concomitantly, the IRS also closed an important loophole in the new program as well.

Key Point: If you have foreign assets or financial accounts and have not participated in past OVDP’s, then now is the time to act! The IRS has implemented a third disclosure program designed to bring U.S. taxpayers back into the system with limited fines and penalties. It’s essential to ACT NOW as the terms of the current program are subject to change at any time!

New OVDP Program

Due to the popularity of the 2009 and 2011 OVDP programs the IRS launched another disclosure initiative earlier this year (January 2012). While the program is similar to past initiatives, the IRS has made a few key changes taxpayers should be aware of. These include: 

  • Penalty Increase. The new program requires individuals to pay a penalty of 27.5% (increased from 25%in the 2011 program) of the highest aggregate balance in foreign accounts or value of assets held offshore during the eight years prior to disclosure. However, in certain situation taxpayers may be eligible for 5% or 12.5% penalties (no increase from the 2011 program).

  • Filing Requirement. Taxpayers who participate in the new program must provide copies of all original and amended returns for the eight years prior to joining the program. They are also required to include payments for back taxes and interest, as well as, penalties and fees depending on the specific situation.

  • Lower Penalty for Small Accounts. For those individuals with offshore accounts or assets that were not worth more than $75,000 in any calendar year covered by the new program will qualify for a reduced penalty rate of 12.5%. Participants that find the penalty rate unjustified may choose to undergo an IRS examination instead (similar to the 2011 program).

  • No Established Deadline. The IRS announced that there is no deadline for when the latest OVDP will close. However, it was clearly stated that the specifics of the program including penalties could be increased at any time. As a result, taxpayers are encouraged to come forward and participate in the new program.

Key Loophole Closed

The IRS also closed a loophole that some taxpayers with foreign accounts have been using to avoid compliance. Under the existing law, if a taxpayer challenges in a foreign court the disclosure of tax information by the foreign government (to the US government), the taxpayer is required to notify the Department of Justice (DOJ) of the appeal. Apparently this has not been happening allowing the taxpayer to avoid compliance with IRS regulations.

 

To close this loophole there has been a change in the eligibility requirements for the program. If a taxpayer submits an appeal in a foreign court and does not notify the DOJ, they will be immediately disqualified from the program. This means they will be responsible for ALL back taxes, penalties and fines! The IRS also announced that eligibility for the OVDP may also be terminated once the U.S. government takes action with the taxpayers foreign financial institution.

Contact Us

Do you or a family member have assets in an offshore account? Have you not yet taken advantage of the OVDP? If so, then contact us today! The changes recently implemented by the IRS may have an impact on your situation. For additional information please contact Robert Puerto, CPA, at 516-248-7361, or click here to email Robert. In a brief consultation he can review your specific situation and determine whether you qualify for the OVDP.

 

.

 

 
 

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

 

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York