USA launches another offshore tax amnesty

10 February 2011

The US Internal Revenue Service has announced details of a second amnesty for US taxpayers with undeclared offshore assets.

The IRS's previous "voluntary disclosure initiative" was open between March 2009 and October 2009. Along with immunity from prosecution, it offered penalties limited to 20 per cent of the value of unpaid taxes, plus 20 per cent of the maximum amount of their undisclosed accounts over the previous six years.

That amnesty drew voluntary disclosures from about 15,000 taxpayers alarmed by the US authorities' litigation against Swiss bank UBS.

The new amnesty, or Offshore Voluntary Disclosure Initiative, is open until 31 August this year. As predicted in STEP Digest (13 December 2010), it is less generous than that of 2009, but includes some redeeming features.

Those who take it up will at least escape prosecution, but will have to pay penalties of 25 per cent of the highest total amount in their foreign bank accounts at any time between 2003 and 2010. They will also have to pay back-taxes and interest going back eight years, accuracy-related penalties of 20 per cent of all tax underpayments, and penalties for failing to file proper returns.

Taxpayers whose offshore assets never exceeded $75,000 in the eight-year period will be charged penalties of only 12.5 per cent. Some - in particular, foreign residents who did not know they were liable to US taxation - may qualify for a special 5 per cent rate.

IRS Commissioner Doug Shulman said this second amnesty is "the last, best chance for people to get back into the system." He also stressed it is open to the 3,000 taxpayers who have told the IRS about their offshore accounts since the end of the 2009 programme.

 

 

Sources

 

Internal Revenue Service

Reuters

Bloomberg

Dow Jones (via Morningstar)

Withers Worldwide comment

 


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