Voluntary Disclosure Program for Offshore Financial Accounts

For the second time, the IRS is giving taxpayers an opportunity to fess up about offshore accounts in exchange for reduced penalties. Under the new Offshore Voluntary Disclosure Initiative, there is a 25% penalty levied on the highest aggregate amount in the foreign account between 2003 and 2010. If the aggregate value of accounts is $75,000 or less, the penalty can be 12.5%. These penalties are less than those that would apply if the IRS found the taxpayers to have hidden accounts after reviewing lists of depositors submitted by certain foreign banks. Taxpayers making voluntary disclosures must file amended returns back to 2003.

In the first voluntary disclosure initiative, which ended in October 2010, more than 14,700 taxpayers came forward.

The IRS continues to issue questions and answers (www.irs.gov/newsroom/article/0,,id=210027,00.html) to help taxpayers handle disclosure. The deadline for participating in this voluntary disclosure program is August 31, 2011.