Why the Window May Be Closing to File for Offshore Voluntary Disclosure

April, 2013

This week has witnessed a small avalanche of articles in the press regarding IRS investigations of failure to disclose offshore foreign accounts. Just the other day, an article appeared in the Wall Street Journal discussing a $74,000,000 penalty imposed earlier this week against Wegelin & Co., a Swiss Bank, as well as other aspects of the IRS investigation. Our past articles discuss many of these aspects as well.
The acceleration of these IRS investigations could likely mean the window is closing for taxpayers with undisclosed overseas bank accounts who have not yet sought counsel to strategize the best course of action, such as through participation in the IRS’s Offshore Voluntary Disclosure Program (OVDP).

In 2009 and 2011 the IRS ran amnesty programs for disclosure of offshore assets. These involved amnesty from criminal prosecution, not amnesty from imposition of penalties. In 2012 the IRS began a new voluntary disclosure program, this one without a set deadline but with the IRS retaining the option to terminate the program or adjust its terms (such as penalties) at any time.

In every iteration, one important precondition for amnesty has remained true: taxpayers currently under IRS investigation are not eligible for voluntary disclosure. This can be complicated by the fact that a taxpayer does not always know when an investigation has begun. It is increasingly likely for foreign banks to provide the names of U.S. accounts holders, whether it is through a separately negotiated agreement (like the recent agreement between three Israeli banks and the Justice Department) or through the FATCO legislation passed in 2010 and coming into force late this year.

For these reasons, it is important for someone who is a candidate for the amnesty program to do file as quickly.

Our team is led by a former manager in the IRS international division who is also a CPA with an MBA in tax. He was also in the IRS appeals division. That is where you will go if you follow his strategy of filing for amnesty and the opting out to try to reduce your fine.

Do not let your advisor learn on the job. Our tax lawyer, CPA suggests you file ASAP to avoid potential criminal charges.