The IRS has announced a new program to encourage compliance with the requirements for reporting foreign bank accounts. On June 18th, the IRS announced major changes to its Offshore Voluntary Disclosure Program (OVDP).
Offshore Voluntary Disclosure Program Changes
The changes reduce the previous 27.5% penalty to 5% for those whose failure to report foreign accounts was “non-willful.” Taxpayers will now generally submit three years of amended tax returns to report income from the accounts (if applicable), six years of FBARs, and a check for the 5% penalty. The changes also increase the penalty to 50% of the highest account balance if it is publicly known that the bank or other firm is under investigation by IRS or US Department of Justice. Taxpayers seeking to avoid this increase in penalties must submit a pre-clearance letter by August 4, 2014.
The streamlined procedures are designed for only individual taxpayers, including estates of individual taxpayers. The procedures cannot be used if the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year or if the taxpayer is under criminal investigation by IRS Criminal Investigation.
Please click here to contact a member of the Warren Averett International CST if you have any questions or would like additional information on the changes.