IRS Answers FAQs for 2012 Offshore Voluntary Disclosure Program – Part 2 from Los Angeles Income Tax Planning and Asset Protection Plan Attorney Bruce Givner

by Bruce Givner on September 19, 2012

“Previously we discussed some of the penalties that will apply to taxpayers with offshore assets who do not voluntarily participate in the 2012 Offshore Voluntary Disclosure Program (OVDP),” said Los Angeles Income Tax Planning and Asset Protection Plan Attorney Bruce Givner.  “Many taxpayers are still confused about who qualifies to participate in the OVDP, and for those who participate, exactly what their tax liability might be.”

Taxpayers eligible to participate in the 2012 Offshore Voluntary Disclosure Program (OVDP) have undisclosed offshore assets, and can also have undisclosed domestic assets.  Taxpayers who participate in the 2012 OVDP must voluntary disclose the most recent eight tax years for which the due date has already passed. However, the eight year period does not include any current years for which there has not yet been non-compliance.  If a taxpayer has disclosed offshore assets in some, but not all, of the most recent eight tax years, the eight year period begins with the eighth year preceding the most recent year for which the return filing due date has not yet passed, but will not include the compliant years.
Also, 2012 OVDP participating taxpayers must pay:
1.      any applicable civil penalties,
2.      a 20% accuracy-related penalty on the total offshore-related tax, and
3.      a penalty, which can be up to 27.5%, of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the period covered by the voluntary disclosure. USC Title 26: Internal Revenue Code.

Example:  A 35% tax rate taxpayer has $1 million in a foreign account.  From 2003 – 2010, the taxpayer earned $400 thousand in interest.  Thus at the end of 2010, the account balance was $1.4 million.  Not counting interest, the taxpayer would owe:
•       Tax of $140,000 ($400,000 x 35%)
•       An accuracy-related penalty of $28,000 ($140,000 x 20%), and
•       A Title 26 penalty of $385,000 ($1,400,000 x 27.5%).

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles County.  Call Los Angeles Income Tax and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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