From President Obama's earliest days in office, he made it clear that the administration would crack down on people who had previously evaded taxes through undeclared offshore bank accounts. To encourage people with undeclared accounts to come forward voluntarily, the administration offered a limited amnesty program.
Through the amnesty program, individuals with past-due taxes could disclose their unreported offshore assets and pay the back taxes while avoiding criminal charges and facing limited civil penalties. Since the announcement of the initial amnesty program, about 15,000 taxpayers have come forward to disclose offshore accounts.
Much of the national attention had temporarily subsided, but the media attention has reappeared with the recent announcement of a second voluntary-disclosure initiative - the 2011 Offshore Voluntary Disclosure Initiative (OVDI). This initiative extends the deadline through Aug. 31, 2011.
Under the second and final such initiative, the terms are slightly less forgiving than the initial disclosure program but generally remain favorable for people with undisclosed offshore accounts.
Generally, people coming forward under the disclosure program will pay a penalty of 25 percent of the amount in the overseas account at its highest aggregate balance between 2003 and 2010. Some people may be eligible for a reduced penalty of 5 or 12.5 percent. In addition, participants must pay back taxes and interest for up to eight years.
There is no doubt that this is a significant penalty. However, people who come forward can avoid criminal prosecution for tax evasion. Furthermore, the penalties are certain to be much steeper for those who do not participate in the voluntary-disclosure program and are later discovered by the IRS.
If you have concerns regarding undisclosed offshore bank accounts, speak with a knowledgeable tax attorney who can help you understand your options. A lawyer who has experience handling these matters can help you navigate the system and minimize the consequences of disclosure.