The IRS has announced three offshore voluntary disclosure initiatives since 2009 - notwithstanding the IRS' standard disclosure process. The latest variant the 2012 Offshore Voluntary Disclosure Program (OVDP) offers penalties on undisclosed foreign financial assets varying between 5% and 27.5%. Other penalties and interest may apply depending on the facts and circumstances. It may be that the initiative is not suitable for some taxpayers in which case they may not wish to enter the program and instead subject their returns to standard IRS examination. This will depend greatly on whether reasonable cause can be established.

The initiative may be suitable for taxpayers who have not filed US income tax returns for themselves, their entities or have not filed their report of foreign bank and financial accounts (commonly known as the FBAR). Also, the initiative may be suitable for those that have filed US incomes tax returns/reports but have omitted accounts or other details pertaining to their foreign financial assets.

On 1 September 2012 the IRS provided a further initiative, a Streamlined Filing Procedure for those individuals living overseas who have not filed tax returns. It is available to those taxpayers who have resided outside of the US since 1 January 2009 and have not filed since that time. To enter the streamlined program in its favourable form a taxpayer must present a low form of compliance risk which in our experience is relatively rare thanks to a number of provisions included by the IRS. Notably this procedure provides no protection from criminal prosecution.

In all cases advice should be taken before submitting any documentation to the IRS.

At Ingleton Partners LLP we have handled many voluntary disclosures to the IRS and through our experience, we can make the disclosure process less onerous than it otherwise might be.

If you have queries on US disclosure please contact us.