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New tax guidelines issued for offshore bank accounts

In our last post we discussed the Internal Revenue Service's Offshore Voluntary Disclosure Initiative (OVDI) which allows Orange County taxpayers to disclose offshore bank accounts without facing criminal penalties. The program does provide for severe financial penalties for certain accounts however. The OVDI extension allows those who are having difficulty meeting the August 31 deadline to apply for more time to comply with all of the requirements of the program.

The IRS' has also provided guidance on how Californians can opt-out of the program which some taxpayers and tax professionals have criticized as confusing and poorly run. The opt-out option allows taxpayers to move their tax cases from the OVDI's civil settlement framework and undergo a standard audit. The IRS has said that this option is only a good idea for a minority of California taxpayers.

The decision to undergo a regular audit of an offshore account is a gamble for some Orange County taxpayers. A taxpayer may pay less tax through the audit process but the opt-out could also result in a much larger bill. An experienced Orange County tax law attorney can help taxpayers determine what process is the best way to handle any outstanding issues with their offshore accounts.

Some tax advisers say that the IRS has failed to consistently handle client needs and some taxpayers have been bounced around to agents all over the country. There are other allegations that the IRS has failed to distinguish between tax evaders and taxpayers who failed to disclose accounts out of fear or ignorance. This "one size fits all" approach to dealing with taxpayers fails to address the variety of situations and perspectives that taxpayers come from.

Additionally the IRS plans to remove some taxpayers that it considers "demonstrably uncooperative." These individuals are taxpayers who have failed to cooperate with the agency and who have IRS examiners who believe that their cases cannot be resolved within a certain time frame.

Source: The Wall Street Journal, "IRS Issues New Guidelines For Overseas Accounts," Arden Dale, 6/4/11

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