The 2011 Overseas Voluntary Disclosure Initiative expires on August 31, so there is now less than three weeks left for non-compliant US taxpayers to come forward and disclose previously unreported overseas accounts and assets under the 2011 OVDI (Overseas Voluntary Disclosure Initiative). This may be the last best chance for non-compliant taxpayers to resolve overseas-related tax and report-filing problems with penalties that can be predetermined and with substantially reduced likelihood of additional civil penalties and criminal prosecution.
However, there is not sufficient time still available to obtain pre-clearance from the IRS for applicants wishing to participate in the 2011 OVDI and it may now require a leap of faith that the applicant qualifies. In our opinion, the potential financially crippling and criminal consequence of getting caught for failing to disclose offshore assets justifies this risk.
If you find yourself in this position you are urged to consult an experienced cross border tax specialist without delay. The international tax specialists at Aylett Grant can review your individual circumstances and provide the advice and assistance you need to resolve your outstanding offshore tax issues.
Seek Legal Advice
Non-compliant US Taxpayers are urged to consult an experienced US tax attorney prior to making any decision. If you need assistance Aylett Grant can recommend an experienced US tax lawyer.
The 2011 Overseas Voluntary Disclosure Initiative
On February 8, 2011 the IRS announced the 2011 OVDI that offered reduced income tax and foreign account reporting penalties for taxpayers that had undisclosed interests in foreign financial accounts and assets. Delinquent taxpayers have until August 31, 2011 to come forward and voluntarily disclose all foreign accounts and assets that have not been previously reported to the Internal Revenue Service. The initiative covers the tax years 2003 to 2009 and requires that all delinquent and amended returns must be filed by the August 31 date. The filing date of 2010 tax returns and information reports was June 30, 2011 and was not extended or included in the Initiative. However, if you act immediately you may only be liable for late filing penalties for your 2010 tax return and reports. Taxpayers that do not have or have not yet received necessary foreign information may file estimated returns and request a 90-day extension in order to provide time to receive the necessary documents. Payment of taxes and penalties due must be made within 30 days of filing. If a taxpayer cannot pay the total amount due the Initiative provides for good faith payment negations.
The Initiative is intended to bring taxpayers hiding funds in foreign countries into compliance with U S tax requirements in a reasonable manner under the circumstances and ensure future compliance with US tax laws. The IRS has realized that delinquent taxpayers must have a degree of certainty with regard to filing penalties, additional civil penalties, and criminal penalties that they may face if they seek to come into compliance with foreign accounting and reporting regulations. The IRS also seeks to make delinquent taxpayers realize the severe potential consequences and the exponentially increasing chances of being discovered. Almost 15 thousand taxpayers responded directly to the 2009 Initiative and thousands more filed amended tax and information returns and paid the required penalties, also known as quiet disclosures. Others responded under the longstanding IRS voluntary disclosure policy in cases where the penalties assessed would be less than the penalties applied under the 2009 Initiative. The 2011 Initiative provides that the civil examiner assigned to a file calculate the total tax and penalties payable under the different scenarios (2011 Initiative, Quiet Disclosure, IRS investigative disclosure) and assess the least amount of penalties applicable.
US Taxpayers are Required to Pay US taxes on Worldwide Income
The United States requires that all US persons pay US taxes on all worldwide income and file certain information reports regardless where they live in the world. Under the US tax code US persons include:
- US citizens
- US residents
- Any other taxpaying entity
Who is Eligible to Participate in 2011 OVDI
The 2011 Offshore Voluntary Disclosure Initiative is available to all persons and entities that come forward and fully disclose all unreported oversees accounts and other assets on or before August 31, 2011. As part of the disclosure agreement participants are required to reveal the identities of any person or entity involved in the tax evasion scheme including banks, financial institutions, bank personnel, bank officers, investment counselors, tax advisors, tax preparers, conspirators, facilitators, participants, and basically answer any question that the IRS asks – all under threat of perjury. Participants of the Initiative are not normally subject to examination if the civil examiner assigned the file finds that the taxpayer has fully complied with the requirements. Participants are normally shielded from criminal prosecution but the IRS reserves the right to refer particularly egregious cases to the Criminal Investigation Division. Any decision to refer the case to the Justice Department for criminal prosecution would be made by the CID.
Who is Not Eligible to Participate in 2011 OVDI
If the IRS has already received specific information regarding a taxpayer’s overseas holdings or has initiated an examination the subject taxpayer will not be eligible to participate in the 2011 Initiative. If a taxpayer has knowledge that the IRS is on his track, for instance, a John Doe warrant has been issued to a partner or participant in an overseas tax avoidance scheme, he may still be eligible if he comes forward before his name is specifically revealed. The IRS is actively mining the information received during the 2009 Initiative and subsequent interviews with participants, facilitators, and other conspirators continue to supply leads to others hiding foreign assets. The net has been cast over an ever-widening scope and it has never been more dangerous than it is now to fail to report oversees holdings and assets.
More OVDI Information
AG TAX LLP Can Help
If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.