2011 Offshore Voluntary Disclosure Initiative (OVDI)
Participation Required by August 31, 2011
One of the IRS's top priorities is to combat tax evasion through the use of off-shore accounts. Taxpayers are required to include income from off-shore accounts on their income tax returns and also make a separate disclosure to the IRS by filing an annual Foreign Account Disclosure form. The separate disclosure is commonly know as an "FBAR" report and is due on June 30th of each year. The penalties for failing to include income from foreign accounts or disclose their existence are so severe they could be in excess of the amount of funds held in the off-shore account. Thus, the IRS has announced the 2011 Offshore Voluntary Disclosure Initiative (OVDI) which allows taxpayers to come forward and disclose their offshore accounts without the risk of criminal prosecution and also take advantage of a reduced penalty structure.
If you own undisclosed or unreported foreign accounts, you should consider participation in the 2011 OVDI program. To be eligible for this program, you need to receive "pre-clearance" from the IRS. The pre-clearance process requires disclosure of all foreign accounts not previously reported to the IRS and/or income from foreign accounts not reported on your prior income tax returns. After clearance, you will have 30 days to complete an Offshore Voluntary Disclosure Agreement. In addition, you will be required to file amended income tax returns for up to eight prior years.
If you wish to participate in the 2011 OVDI or have any other questions concerning your tax reporting responsibilities concerning off shore accounts, please contact our tax manager Terry Martin or call 215-675-8364.
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