The Internal Revenue Service has given a deadline of August 31st for taxpayers to come forward and report any previously unreported assets in offshore bank accounts. In exchange, the IRS is offering a reduction in penalties and a promise of no jail time.
IRS Commissioner Doug Shulman said, "This new effort gives those hiding money in foreign accounts a tough, fair way to resolve their tax problems once and for all. And it gives people a chance to come in before we find them."
People who come forward will have to pay back taxes, plus interest and late fees for up to eight years. Penalties will be up to 25% on the highest account balance going back to 2003. Some account holders will be eligible for a 5% penalty, depending on the size of the account.
Orange County tax attorneys note that the IRS had a similar, slightly more generous, voluntary disclosure program in 2009. That program brought in more than fifteen thousand taxpayers with secret offshore bank accounts that were located in more than sixty countries.
The IRS made the penalties higher in this amnesty in order not to benefit people who failed to come forward in 2009. It also sends the message that waiting this time will also not be rewarded. The IRS says it will be putting more resources into cracking down on undisclosed offshore accounts, so it would benefit account holders to come forward before they are found.
Commissioner Shulman said, "The situation will just get worse in the months ahead for those hiding assets and income offshore. This new disclosure initiative is the last, best chance for people to get back into the system."
Source: CNN Money "Tax cheats: Fess up without going to jail" 2/9/2011