The U.S. Government has published a directive that provides for a procedure that will allow foreign assets of US taxpayers to be disclosed to the IRS, under certain conditions, avoiding criminal prosecution.
On March 23, 2009, the Internal Revenue Service published an arrangement to encourage voluntary disclosure for those citizens of the US who have funds abroad and who have not properly filed tax returns or information with regard to these assets. The Voluntary Disclosure Program will provide for the taxpayer to give information for the last 6 years of assets and income earned in accounts abroad and will require the taxpayer to pay taxes, interest and penalties on the amounts. There will also be an additional penalty on the amount in foreign bank accounts and assets in foreign entities in the year with the highest aggregate account or asset value. In return, the IRS will not impose any criminal penalties.
In the past such taxpayers have been reluctant to provide any information to the government since the potential charges and penalties, civil and criminal, were so severe and onerous that the end results were at best unclear.
The program will only be in effect for six (6) months from March 23, 2009. If the disclosure is filed during that period, it is clear that criminal prosecutions will not be pursued by the government. Before contacting the IRS, a taxpayer should review all relevant information with tax experts who can assist in making the appropriate filings. Once the information is submitted to the IRS, it is difficult to amend it. Therefore, before proceeding, one must fully understand what information needs to be disclosed, and properly disclose the information.
Obermayer’s Tax Department is familiar with the procedure and will assist taxpayers who have foreign assets and wish to discuss this program.
The following article written by Warren W. Ayres was published in The Legal Intelligencer