In a move to assuage criticism of the current Offshore Voluntary Disclosure Program (OVDI), the IRS announced today that it is making changes that will help those with smaller accounts from being punished excessively. The new rules will allow taxpayers to qualify for lower penalties, if any at all, while paying taxes on unreported income over the last three years. Previously, only those who owed $1,500 or less were granted an “amnesty”. National taxpayer advocate Nina Olson said "While these modifications don't address all our concerns, I believe they are a significant step in the right direction".
- Under the new Domestic Offshore Procedure the taxpayer must:
- For each of the most recent 3 years for which the US tax return due date (or properly applied for extended due date) has passed (the “covered tax return period”), file amended tax returns, together with all required information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621),
- For each of the most recent 6 years for which the FBAR due date has passed (the “covered FBAR period”), file any delinquent FBARs (FinCEN Form 114, previously Form TD F 90-22.1),
- Pay a Title 26 miscellaneous offshore penalty, and the full amount of the tax, interest, and miscellaneous offshore penalty due in connection with these filings.
The IRS also announced a separate group of requirements for US citizens living abroad.
Commissioner John Koskinen said yesterday that "Our aim is to get people to disclose their accounts, pay the tax they owe and get right with the government, [and] a compliance regime that is too harsh won't net the desired result".
Please feel free to call us or go to www.irs.gov for more information.