In an effort to bring more tax evaders to the surface, the IRS has issued a new voluntary offshore compliance initiative in March of 2009, which provides more lenient penalties for tax evaders who have placed their assets overseas. In this initiative, taxpayers who voluntarily disclose their wrongdoings will only be punished with paying back taxes, certain penalties, and interest. Those who come forward will not face criminal charges unless strong evidence suggests criminal behavior. Since this compliance initiative overlooks the criminal prosecution aspect of tax evasion, it is useful for anyone who has wrongfully concealed their full income in past tax returns.

Also, the FBAR (Report of Foreign Bank and Financial Accounts) filing deadline has been extended from June 30, 2009 to September 23, 2009. Due to the newly changed definition of “United States person”, there has been confusion over who is required to file the FBAR; those who are filing for the June 30th deadline should use the July 2000 definition of “United States person” instead of the newly changed definition.

CCH (http://tax.cchgroup.com/) reports:

The IRS is combing amended returns for taxpayers who have made “quiet disclosures” to circumvent the Service’s temporary offshore compliance initiative. The Service reiterated in new frequently asked questions (FAQs) about the initiative on its website (www.irs.gov) that taxpayers who make quiet disclosures will not escape penalties and possible criminal prosecution. The Service also is giving some taxpayers additional time to file Form 90-22.1, Report of Foreign Bank and Financial Accounts (known as the “FBAR”).

Quiet Disclosures

The IRS launched its voluntary offshore compliance initiative in March (TAXDAY, 2009/03/27, I.3). In exchange for full disclosure of offshore accounts and the payment of back taxes, interest and certain penalties, the IRS will not seek criminal prosecution of wrongdoers. In April, IRS Commissioner Douglas H. Shulman said he was pleased with the response but the Service has been tight-lipped about how many taxpayers have come forward.

Rather than formally applying to participate in the initiative, some taxpayers have filed amended returns reporting previously undisclosed assets. The IRS is reviewing amended returns. The Service cautioned that, if it discovers evidence of criminal behavior, it will recommend criminal prosecution.

Taxpayers whose quiet disclosure returns have not been selected for examination may request to participate in the initiative. These taxpayers must meet all of the criteria for participation, the IRS explained.

FBARs

June 30, 2009, is the deadline for filing 2008 FBARs. The IRS previously clarified the filing requirement for FBARs (IR-2009-58, Announcement 2009-51; TAXDAY, 2009/06/08, I.5). A recent change in the definition of “United States person” created confusion for filers. For FBARs due on June 30, 2009, taxpayers should use the prior (July 2000) definition to determine who must file an FBAR, the IRS explained.

Now, the Service has provided additional FBAR relief. Taxpayers who recently learned that they have an FBAR filing obligation but do not have sufficient time to gather the necessary information to file by June 30 may file before September 23, 2009, without penalty. The taxpayer must have reported and paid tax on his or her 2008 taxable income, the IRS cautioned. This treatment mirrors similar relief previously provided to tax years before 2008.

“The September 23 deadline is good news,” Walter Goldberg, IRS Practice & Procedures, executive director, Grant Thornton, LLP, Washington, D.C., told CCH. “Taxpayers and practitioners are hopeful that the IRS will continue to answer questions about the initiative.”

By George L. Yaksick, Jr., CCH News Staff

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Tags: Back Taxes, FBAR, interest, IRS debt, irs news, penalties, quiet disclosures, tax audit, tax deadline, tax help, tax problems, tax resolution, voluntary offshore compliance initiative

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