As the August 31, 2011, deadline to participate in the Offshore Voluntary Disclosure Initiative nears, it is increasingly more important for people to decide whether they are going to make voluntary disclosures of their foreign bank accounts, and if so, to prepare their required submissions. Several steps must be accomplished before the deadline in order to participate in the OVDI, although a deadline extension may be available in some cases.
The Internal Revenue Service requires U.S. citizens and business entities to report foreign bank accounts that held more than $10,000 at any time in 2010 in a Report of Foreign Bank and Financial Accounts, or FBAR. Because the IRS expect there are large numbers of taxpayers who did not file required FBARs, the agency is offering a voluntary disclosure program in which people disclose their qualifying but previously unreported offshore accounts from 2003 to 2010 - paying penalties, back-taxes and interest - in exchange for the opportunity to come into compliance without the risk of criminal prosecution for tax evasion and other tax crimes.
To participate in the 2011 OVDI, people must submit their complete voluntary disclosure packages to the Austin Campus of the IRS on or before August 31, 2011. According to the IRS, the package must include:
•· Accurate amended federal income tax returns for any qualifying years from 2003 to 2010
•· Copies of the previously filed original federal income tax returns from qualifying years
•· A Foreign Account or Asset Statement for each previously undisclosed foreign financial account
•· An accurate and signed Taxpayer Account Summary with Penalty Calculation
•· Financial statements showing all account activity for foreign accounts with $500,000 or more and Foreign Financial Institution Statements for each foreign institution that held $1 million or more in a taxpayer's accounts
Most important, 2011 OVDI participants also must submit checks payable to the Department of Treasury for the total amount of tax, interest and penalties owed from 2003 to 2010 in their voluntary disclosure packages. If a taxpayer cannot make total payment before the August 31 deadline, he or she must submit a proposed payment arrangement and Collection Information Statement in the package.
People who would like to participate but cannot meet the deadline may request an extension if they demonstrate good-faith attempts to fully comply with the deadline. A written extension request must be sent to the Austin Campus before the OVDI deadline, and it must include a statement of the items that are missing, the reasons why they are missing and the steps already taken to procure them, among other things.
Choosing to participate in the 2011 OVDI is a significant decision, and the counsel of an experienced tax attorney is invaluable when contemplating disclosure of offshore bank accounts. If you are considering participating in the OVDI, contact a knowledgeable tax lawyer to discuss your situation.
