Norris McLaughlin & Marcus, P.A.

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Taxpayers Get Another Chance to Disclose Foreign Bank Accounts

Posted on March 9th, 2011 | Author: Norris McLaughlin & Marcus

On February 8, 2011, the IRS announced the 2011 Offshore Voluntary Disclosure Initiative, which ends on August 31, 2011.  Participation in the program allows taxpayers to potentially avoid criminal investigation and fixes penalties at lower rates than those which would typically apply.

To participate, taxpayers must file amended tax returns for 2003 through 2010 that include any unreported income or gains from those years and pay the tax thereon plus a 20% accuracy related penalty.  There are additional penalties if taxpayers failed to file returns for any of the disclosure years.  In addition, taxpayers may be subject to an FBAR (Form TDF 90-22.1) penalty equal to 25% of the highest aggregate balance in the undisclosed foreign account from 2003 to 2010, which is reduced to 5% for certain taxpayers who either (1) did not open the account, had minimal contact with the account, did not withdraw more than $1000 in any year and can prove U.S. tax was paid on the principal deposited into the account or (2) are foreign residents unaware they were U.S. citizens. The FBAR penalty is also reduced to 12.5% for taxpayers with account balances less than $75,000.

New Jersey has also launched a Voluntary Compliance Program with a deadline of September 30, 2011.

Consult with an attorney to determine whether you are eligible to participate.