Legal Alert - IRS Provides Long Awaited Guidance to Current Offshore Voluntary Disclosure Program and Announces a New Procedure to Assist U.S. Citizens Residing Overseas
by Carlene Y. Lowry and William A. Kastin
As reported in our January 10, 2012 Legal Alert, the Internal Revenue Service (IRS) has announced another offshore voluntary disclosure program (the Current OVDP) with a goal of bringing U.S. persons into compliance with respect to their foreign asset and foreign account reporting obligations. On June 26, 2012, the IRS provided updated guidance to the Current OVDP.
The IRS previously instituted offshore voluntary disclosure initiatives in 2009 and 2011. Distinctions between the 2011 offshore voluntary disclosure initiative (2011 OVDI) and the Current OVDP include those discussed in our January 10, 2012 legal alert. For example, unlike the 2011 OVDI, there is no set deadline for U.S. persons to enter into the Current OVDP. Notwithstanding this apparent open-endedness, however, taxpayers should keep in mind the IRS may change the terms of, or terminate, the Current OVDP at any time. Another example of the differences between the 2011 OVDI and the Current OVDP is with respect to the penalty structure. The highest penalty rate has been increased from 25% (applicable in the 2011 OVDI) to 27.5% (in the Current OVDP) of the highest aggregate balance in the applicable foreign bank accounts/entities or the value of the applicable foreign assets held during the applicable disclosure period; provided, however, the 5% and 12% reduced penalty rates announced in the 2011 OVDI remain available in the Current OVDP if certain requirements are met.