New IRS Initiative Targeting Those Hiding Assets Off-Shore04/08/2011 | Spring 2011 Newsletter
On February 8, 2011, the IRS announced that it would provide a second (and probably final) opportunity to report the existence of an interest in a foreign account without fear of criminal prosecution.
Federal law requires that all those having an interest in a foreign account at any time during a taxable year must file a Form TDF 90-22.1 (“FBAR”) with the IRS on or before June 30th of the following year. Failure to do so is a crime, and may subject the taxpayer to a penalty equal to 50% of the highest value of the account during each of the years for which an FBAR was not filed (not limited to the amount on deposit in the account), and a penalty equal to 75% of the taxes owed on the unreported income from the account, plus interest.
Persons who qualify under the new Voluntary Disclosure Program (the “Program”) which ends on August 31, 2011 will receive immunity from criminal prosecution and be subject to reduced penalties. A person is not eligible to apply if the IRS is already aware of, or has already begun investigating, the individual. In order to determine if a person is eligible to apply for the Program, the person need only submit their name, address and social security number. If the person receives notice that they are eligible to apply, then they must submit additional documentation, including information regarding their accounts. If the IRS determines that the information was submitted in good faith, the IRS will admit the person into the Program, the person will be absolved of criminal liability, and the penalty for failing to file the FBAR will be reduced to a one-time, 25% penalty computed on the highest amount in the account over the last eight (8) years. In certain instances, this penalty may be reduced to 12.5% (if the highest value of the account was under $75,000), and to 5% under limited circumstances. In addition, the civil penalty will be reduced to a flat 20% of the additional tax that is due.
To qualify, all of the required docu-mentation, including all amended returns and related forms required by the IRS, accompanied by the payment of the penalties, tax and interest, must be submitted by August 31, 2011.
Accordingly, we urge all of our clients and friends to contact us if they feel they, or someone they know, may be able to benefit from this Program.