On January 9, 2012, the IRS declared the reopening of its Offshore Voluntary Disclosure Program (OVDP). The program allows U.S. taxpayers with unreported offshore income and assets to comply with U.S. tax obligations.

The program is reopening due to a strong interest with 33,000 voluntary disclosures in 2009 and 2011 combined, amounting to over $4.4 billion. Since the closure of the 2011 OVDP in September, numerous taxpayers have stepped up to make voluntary disclosures. These taxpayers will be counseled under the provisions of the new OVDP.

The 2011 OVDP instituted a 25 percent penalty on undisclosed assets in a foreign bank account in the year with the highest aggregate balance. The new OVDP tops that with a 27.5 percent penalty on undisclosed assets in foreign bank accounts/or the value of undisclosed foreign assets over the course of eight full tax years before disclosure. Taxpayers must also pay taxes and interest for the last eight years and accuracy-related and penalties.

In the 2011 OVDP, taxpayers with inherited accounts, which they have not accessed, may be eligible for a 5 percent penalty reduction. The new OVDP will enforce a reduced penalty of 12.5 percent for offshore accounts that did not accumulate more than $75,000 during relevant tax years.

Differing from the 2011 program, the new OVDP does not specify a deadline for enrollment or completion of the program. The IRS advises caution regarding the conditions of the new program, as they may change or be terminated.

For all international tax matters – contact the the tax experts at Givner & Kaye, APC. (310) 207-8008