Tax amnesty for foreign accounts ending

You're not freaking out about the U.S. stock market's plunge in the wake of Standard & Poor's downgrade of America's creditworthiness. You've got most of your investments outside the United States.

I'm not here to debate the value of that investment strategy given some of the financial and economic problems in other parts of the world.

But I do feel compelled to remind you that if you've been, shall we say, a bit sneaky about your international holdings, the Internal Revenue Service has some news for you.

Folks hiding income in undisclosed offshore accounts are running out of time to take advantage of a soon-to-expire opportunity to come forward and take care of their tax obligations.

And just to be clear, "offshore" doesn't just mean money in a bank on an island paradise. In IRS-speak, it's any non-U.S. account or asset.

Amnesty again: On Feb. 8, the IRS initiated its 2011 Offshore Voluntary Disclosure Initiative, or OVDI.

Commonly referred to as an amnesty for offshore accounts, the program will give taxpayers who voluntarily reveal their foreign holdings a better deal than those who don't and then are found by IRS investigators.

This latest deal was devised after the agency had such a good turnout for an earlier offshore amnesty program.

But your opportunity to come clean is nearly over. The voluntary foreign account disclosure option ends on Aug. 31.

"The time has come to get back into compliance with the U.S. tax system, because the risks of hiding money offshore keeps going up," said IRS Commissioner Doug Shulman. "Our goal is to get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems."

Tougher rules on the way: This latest chance to clear up your taxes is in advance of new foreign account reporting requirements are being phased in over the next few years. These new rules, says the IRS, will make it even tougher to hide income offshore.

Meanwhile, the IRS continues to focus on banks and bankers worldwide that assist U.S. taxpayers with hiding assets. 

Just last week, a former employee of UBS, Switzerland's national bank, was indicted on a charge of conspiring to help wealthy Americans evade taxes by hiding accounts in a smaller Swiss regional bank. The indictment cites nine U.S. customers.

To encourage foreign account holders reveal their offshore money before indictments are issued, the offer available through the end of August requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance between 2003 and 2010. Some taxpayers will be eligible for 5 or 12.5 percent penalties in certain narrow circumstances.

Foreign account owners who 'fess up also must pay back taxes and interest for up to eight years, as well as pay accuracy-related and/or delinquency penalties.

And all original and amended tax returns must be filed by the deadline.

The IRS has a questions and answers page on the OVDI requirements and process. Robert W. Wood, who blogs as The Tax Lawyer, also has a good list of what you need and need to do by Aug. 31 to get in on this latest IRS amnesty deal.

Good luck with your foreign and domestic assets and their U.S. taxes.

Related posts:

• IRS to get 'most-wanted' Swiss accounts
• Offshore amnesties are international
• Tax evasion, tax fraud, tomato, tomahto

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