By Jasper G. Taylor, III,
Robert C. Morris and
The IRS, in a news release dated January 9, 2012, IR-2012-5,
announced the reopening of its offshore voluntary disclosure program
("2012 Offshore Voluntary Disclosure Program") that allows taxpayers
with undisclosed offshore accounts to settle tax liabilities with the
IRS to avoid criminal prosecution. This third iteration of the offshore
voluntary disclosure program comes as "the IRS continues working on a
wide range of international tax issues and follows ongoing efforts with
the Justice Department to pursue criminal prosecution of international
IRS Slightly Alters Penalty Framework From Prior Disclosure Program
The 2012 Offshore Voluntary Disclosure Program is similar to the 2011
program in many ways, but there are a few key differences. See IRS Gives Taxpayers with Undisclosed Offshore Accounts a Second Chance
for a detailed discussion of the 2011 program. The 2012 Offshore
Voluntary Disclosure Program generally imposes a maximum penalty of 27.5
percent, as opposed to 25 percent under the 2011 program, of the
highest aggregate balance in foreign bank accounts/entities or value of
foreign assets at any time during the past eight years.
The 2012 Offshore Voluntary Disclosure Program also retains the reduced
penalties of 12.5 percent and 5 percent that taxpayers may qualify for
in certain circumstances. Similar to the 2011 program, taxpayers
participating in the 2012 Offshore Voluntary Disclosure Program must
also file original and amended tax returns, and pay back taxes and
interest for a maximum of eight years, as well as accuracy related
and/or delinquency penalties.
IRS Considers Earlier Offshore Voluntary Disclosure Programs Successful
The IRS has received 33,000 voluntary disclosures under the 2009 and
2011 programs, and its success in offshore enforcement and in the
disclosure programs "has raised awareness related to tax filing
obligations." Participants in the earlier disclosure programs paid
approximately $4.4 billion, and approximately 95 percent of the cases
from the 2009 program have been closed.
IRS Encourages Taxpayers To Take Advantage of 2012 Offshore Voluntary Disclosure Program
Although the 2012 Offshore Voluntary Disclosure Program does not have a
set expiration date, the IRS cautioned that "the terms of the program
could change at any time going forward . . . [and] the IRS may increase
penalties in the program for all or some taxpayers or defined class of
taxpayers - or decide to end the program entirely at any point." As
Commissioner Shulman noted, "As we've said all along, people need to
come in and get right with us before we find you . . . We are following
more leads and the risk for people who do not come in continues to
The IRS plans to make more details regarding the 2012 Offshore
Voluntary Disclosure Program available within the next month on the
IRS's website, and the IRS will also be updating key Frequently Asked
Questions and providing additional specifics on this program.
This article was prepared by Jasper G. "Jack" Taylor III (email@example.com or 713 651 5670), Robert C. Morris (firstname.lastname@example.org or 713 651 8404) and Zhusong Yang (email@example.com or 713 651 3756) from Fulbright's Tax Controversies Practice Group.
If you have any questions or need any assistance related to these or any other tax controversy matters, please feel free to contact the authors listed above or Nancy T. Bowen (firstname.lastname@example.org or 713 651 7705), Charles W. Hall (email@example.com or 713 651 5268), Richard L. Hunn (firstname.lastname@example.org or 713 651 5293), Kathryn Keneally (email@example.com or 212 318 3213), Andrius R. Kontrimas (firstname.lastname@example.org or 713 651 5482) or William S. Lee (email@example.com or 713 651 5633).
IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, we inform
you that any U.S. federal tax advice contained in this communication
(including any attachments) is not intended or written to be used, and
cannot be used, for the purpose of (i) avoiding penalties under the
Internal Revenue Code or (ii) promoting, marketing or recommending to
another party any transaction or tax-related matter[s].
Fulbright & Jaworski L.L.P. has offices in:
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Copyright 2012 - Fulbright & Jaworski L.L.P., all rights reserved.
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