prepare for round 3: irs reopens offshore voluntary ...€¦ · prepare for round 3: irs reopens...
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Business Tax/White Collar Alert
www.BlankRome.com January 2012 No. 1
© 2012, BLANK ROME LLP. Notice: The purpose of this newsletter is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. The Advisory should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.
One Logan Square • Philadelphia, Pennsylvania 19103-6998 • 215.569.5500
Prepare for Round 3: IRS Reopens Offshore Voluntary Disclosure Program
By Matthew D. Lee and Jennifer L. Bell
On January 9, the Internal Revenue Service (“IRS”) reopened
its Offshore Voluntary Disclosure Program (“OVDP”) for U.S. tax-
payers holding undisclosed foreign bank accounts. The OVDP
permits eligible taxpayers with secret foreign bank accounts, and
unreported income associated with those accounts, to obtain
amnesty from criminal prosecution in return for the payment of
back taxes, interest, and penalties.
Two previous IRS programs for taxpayers with foreign bank
accounts, which ran in 2009 and 2011, brought in more than
$4.4 billion in taxes from tens of thousands of U.S. taxpayers,
according to the IRS. “Our focus on offshore tax evasion contin-
ues to produce strong, substantial results for the nation’s taxpay-
ers,” said IRS Commissioner Doug Shulman in a statement. “We
have billions of dollars in hand from our previous efforts, and we
have more people wanting to come in and get right with the gov-
ernment. This new program makes good sense for taxpayers still
hiding assets overseas and for the nation’s tax system.”
The new OVDP is similar to the 2011 program in several
ways, with a few significant differences.
First, the third program will be open for an indefinite period
of time until otherwise announced. However, the terms of the
program could change at any time. For example, the IRS may
increase penalties in the program for all or some taxpayers or
defined classes of taxpayers – or decide to end the program
entirely at any point.
Second, the overall penalty structure for the new program is
the same as for 2011, except for the taxpayers in the highest
penalty category. The penalty framework requires individuals to
pay a penalty of 27.5 percent, up from 25 percent in the 2011
program, of the highest aggregate balance in foreign bank
accounts/entities or value of foreign assets during the eight full
tax years prior to the disclosure. Like the 2011 program, this
penalty may be reduced to either 12.5 or 5 percent under
limited circumstances.
Participants must generally pay back taxes and interest for the
past eight years, as well as accuracy-related and/or delinquency
penalties of 20 percent of the taxes due. Participants must also
file all original and amended tax returns, and pay all taxes,
interest, and penalties. Taxpayers who made voluntary disclo-
sures since the 2011 program closed last year will be able to be
treated under the provisions of the new OVDP.
It is widely believed that many U.S. taxpayers did not seek
amnesty under the first and second programs and are still on the
fence regarding whether to report their offshore assets.
Individuals who continue to hide assets offshore and choose not
to participate in the 2011 OVDI can face substantial civil penal-
ties as well as the possibility of criminal prosecution. “As we’ve
said all along, people need to come in and get right with us
before we find you,” Commissioner Shulman said. “We are
following more leads and the risk for people who do not come
in continues to increase.”
ALERTBUSINESS TAX/WHITE COLLAR
2BLANK ROME
To date, federal prosecutors have criminally charged more
than thirty individuals with violating U.S. law by maintaining
secret foreign bank accounts. A number of foreign bankers, attor-
neys, and advisors have also been criminally charged, and many
foreign financial institutions, including banks in Switzerland,
Israel, and India, are under investigation as the U.S. government
continues its global crackdown on offshore tax evasion.
Individuals with questions about foreign bank accounts, or
who are considering making a voluntary disclosure to the IRS
regarding foreign bank accounts, should consult experienced tax
counsel to understand the benefits and risks of the voluntary dis-
closure process. Blank Rome LLP has significant experience with
IRS voluntary disclosure practice and can assist individuals in
navigating the voluntary disclosure process.
Jerry D. Bernstein, Chair 212.885.5511 • [email protected]
Laura Brill Deegan 212.885.5533 • [email protected]
Ian M. Comisky 215.569.5646 • [email protected]
Nicholas C. Harbist 609.750.2991 • [email protected]
Matthew D. Lee 215.569.5352 • [email protected]
Gregory F. Linsin 202.772.5813 • [email protected]
Inbal Paz 212.885.5010 • [email protected]
Jennifer Peru Gary 202.772.5863 • [email protected]
Joseph G. Poluka 215.569.5624 • [email protected]
Marc Rothenberg 212.885.5121 • [email protected]
Laurence S. Shtasel 215.569.5691 • [email protected]
Shawn M. Wright 202.772.5968 • [email protected]
White Collar Defense and Investigations Practice
To ensure compliance with IRS Circular 230, you are hereby notified that any discussion of federal tax issues in this letter is not intended or written to
be used, and it cannot be used by any person for the purpose of: (A) avoiding penalties that may be imposed on them under the Code, and (B) pro-
moting, marketing or recommending to another party any transaction or matter addressed herein. This disclosure is made in accordance with the rules
of Treasury Department Circular 230 governing standards of practice before the Service.
Joseph T. Gulant, Chair 212.885.5304 • 215.569.5648 • [email protected]
Jennifer Lynn Bell 212.885.5402 • [email protected]
Daniel R. Blickman 215.569.5373 • [email protected]
Megan A. Christensen 202.772.5897 • [email protected]
Susan A. Cobb 202.772.5859 • [email protected]
Joseph M. Doloboff 424.239.3424 • [email protected]
Cory G. Jacobs 215.569.5481 • [email protected]
David M. Kuchinos 215.569.5729 • [email protected]
Jeffrey M. Rosenfeld 215.569.5752 • [email protected]
Michael I. Sanders 202.772.5808 • [email protected]
Barry E. Sweet 215.569.5722 • [email protected]
Business Tax Practice
© 2012, BLANK ROME LLP. Notice: The purpose of this newsletter is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. The Advisory should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.
One Logan Square • Philadelphia, Pennsylvania 19103-6998 • 215.569.5500