Offshore Accounts Disclosure Program

Summary Issue #1: Offshore Accounts Disclosure Program.

The IRS recently introduced program of voluntary disclosure of offshore accounts meaning that every taxable party who holds any bank account outside of US in total of more than $10K must report it on the tax returns. The program came out for the first time in 2009 and it drew about 15,000 people who reported the undeclared accounts. The delinquent tax payers had to pay the tax on the earned interests plus 15% of penalty on total outstanding balance of the account. This year the IRS decided to do the 2nd. round of disclosure but instead of 15% of penalty, the IRS decided to impose 25% penalty on the total outstanding balance of the account or value of the assBet. The penalty is assessed on the highest value of the assets over last eight years. It all started from the UBS Bank that has lost its case and had to divulge the names of 52,000 wealthy American clients. From year 2013 all foreign banks and other financial institutions will be forced to report of accounts of all US tax payers to IRS. The main benefit of voluntary disclosure initiative is that those who will come forward won’t face criminal charges and penalties.

The reality of this problem is that this program will affect in great majority not the wealthiest taxpayers but those small individual low income tax payers, most of them emigrants and hard working people who have some offshore accounts either due to inheritance , real estate sales or funds that were moved from US accounts to offshore accounts due to better interests. Most of those funds came from legal sources and had already been taxed in their home country. The dilemma pertaining this case is that the current penalty which is 25% is unreasonably high and it will only discourage the tax payers from coming forward. In 2009 according to IRS 15,000 tax payers decided to take advantage of the program but in 2010 supposedly they counted on 5,000 who decided to declare their accounts. In New...