2011 Voluntary Disclosure Initiative (OVDI) for Unreported Offshore Accounts

There has recently been a flurry of press surrounding the IRS’ announcement of a new 2011 Voluntary Disclosure Initiative (OVDI) for offshore accounts. This program is part of the Department of Justice’s targeting of offshore bank account holders who fail to report income associated with the account on their U.S. tax returns or fail to file. An FBAR (foreign bank account report) is a special report that is separate from the tax return.  With the breaking of the Swiss Banking Secrecy, the Department of Justice was able to uncover suspected tax evaders and hone their investigation techniques.

The 2011 voluntary disclosure initiative is the latest amnesty program offered by the IRS for taxpayers with unreported income from offshore accounts who wish to avoid criminal charges related to tax returns for tax evasion (26 U.S.C. 7201), filing a false return (26 U.S.C. 7206(1)), and failure to file an income tax return (26 U.S.C. 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. 5322.  A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000.  Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000. If you qualify for and decide to proceed with this initiative, you will likely not only greatly decrease potential criminal exposure but you will also decrease your exposure to fines, penalties, and other fees.   The IRS Commissioner Shulman has described the 2011 OVDI as “the last, best chance for people to get back into the system.”

With this 2011 initiative, you must finish program requirements by August 31, 2011.   Seeking the protection of this voluntary disclosure program is a serious decision and should be done knowingly and properly.   At the Law Offices of Stephen Moskowitz, LLP we have many years of substantial experience with the voluntary disclosure program, international tax issues, and related matters in advice, execution, and legal defense.  If you have any questions or concerns regarding foreign income, foreign bank account(s), reporting or the amnesty program please feel free to call (415) 394-7200 and schedule a complimentary attorney-client privileged consultation.  We can advise you on the best strategy to limit your liability and provide you the best protection.  For more information on a foreign bank, reporting visit moskowitzllp.com.