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Monday, July 14, 2014

IRS Offers Clean Slate for Undeclared Foreign Accounts


If the tax status of your undeclared overseas accounts is keeping you up at night, effective July 1st Uncle Sam may have just issued you a “Get Out of Jail Free Card.” The IRS has announced a big change to their Offshore Voluntary DisclosureProgram (OVDP), making it easier than ever for those with undeclared offshore accounts to reach tax compliance.

Over the past seven to eight years, the IRS has stepped up their enforcement of auditing individuals with over $10,000 in accounts overseas. Under previous programs, even voluntarily coming forward and declaring the overseas accounts could carry a penalty of 27.5% the highest value of the undeclared accounts. But in an effort to encourage more Americans to come clean, the new program drastically reduces the penalty to 5% for domestic taxpayers, and even 0% for those living abroad.

The IRS explains that these new procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was clearly non-willful. “This opens a new pathway for people with offshore assets to come into tax compliance,” said IRS Commissioner John Koskinen. “The new versions of our offshore programs reflect a carefully balanced approach to ensure everyone pays their fair share of taxes owed. Through the changes we are announcing today, we provide additional flexibility in key respects while maintaining the central components of our voluntary programs.”

Some examples may include those who have been on or recently returned from an assignment overseas for an extended period of time, those who have recently immigrated to the United States and still have accounts overseas, first or second-generation citizens who may have accounts set up by their parents, and perhaps older citizens who may have forgotten about overseas assets. Thanks to these new procedures, individuals in these situations will have a much easier time coming forward and clearing the record, rather than being lumped in with those intentionally hiding their overseas accounts.

For more information on the changes to the new OVDP, click here or contact me at Valensi Rose, PLC.

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