On February 8, 2011, the IRS announced a second voluntary disclosure program that will give taxpayers with unreported foreign accounts, assets or income an incentive to come forward and get caught up on their overdue tax payment and reporting requirements.
Those taxpayers who reported all their foreign income, but failed to file required disclosure forms during the period 2003 through 2010, including Reports of Foreign Bank and Financial Accounts and Forms 5471, 5472, 926, 8865, and 3520, can file these and attach a statement of explanation by August 31, 2011 and avoid all penalties.
Taxpayers who failed to report all of their offshore income and who come forward and file amended tax returns to pick up the omitted income, file all the required disclosure forms, and pay or make arrangements to pay all overdue taxes (including applicable penalties and interest) by August 31, 2011, will be eligible for reduced penalties for failure to file the required foreign disclosure forms and can ensure that they will not be subject to criminal prosecution. The penalty for failure to file the required disclosure forms will be limited to 25% of the highest aggregate account balance in foreign bank accounts (including the fair market value of foreign assets that were either acquired with improperly untaxed funds or that produced income that was improperly not reported). This penalty is limited to 12.5% if the highest aggregate account balance or the fair market value of tainted assets was at all times less than $75,000. The penalty is reduced further to 5% in very limited special circumstances.
Please contact an Aronson tax advisor at 301.231.6200 if you think that you may be able to take advantage of the new IRS initiative or if you would like more information.