The IRS is offering people with undisclosed income from offshore accounts an opportunity to participate in a new, voluntary disclosure initiative in order to get current on their tax returns. The 2011 Offshore Voluntary Disclosure Initiative (OVDI) will be available only through Aug. 31, 2011.
The 2011 initiative has a higher penalty rate than the IRS’s previous voluntary disclosure program, which ended on Oct. 15, 2009, but offers clear benefits to encourage taxpayers to disclose foreign accounts now rather than risk IRS detection and possible criminal prosecution. In addition, the 2011 initiative includes new guidelines to provide fairness to people with smaller amounts of undisclosed assets or unusual situations.
The following information Forms are required along with original tax return or amended tax return:
1. Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”).
2. Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
3. Form 3520-A, Information Return of Foreign Trust With a U.S. Owner.
4. Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations.
5. Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business.
6. Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation.
7. Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.