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On February 8, 2011, the Internal Revenue Service ("IRS") announced the 2011 Offshore Voluntary Disclosure Initiative ("OVDI") for taxpayers with certain undisclosed offshore assets. The OVDI is the most recent version of the U.S. government's attempts to encourage to U.S. taxpayers to bring their offshore compliance up to date while at the same time potentially avoiding criminal penalties. Taxpayers will be required to report unreported income earned in 2003 through 2010 and file correct, complete amended and information returns by no later than August 31, 2011. In addition to paying the unreported tax and applicable interest, as well as the special penalty discussed below, taxpayers accepted into the OVDI will be subject to: (1) a 20% accuracy-related penalty under IRC § 6662(a) on the full amount of the taxpayer's underpayments for all year; (2) a failure to file penalty under IRC § 6651(a)(1), if applicable; (3) a failure to pay penalty under IRC § 6651(a)(2), if applicable; and (4) in most cases, in lieu of all other penalties that may apply, a penalty equal to 25% of the amount in the foreign bank accounts in the year with the highest 2003 through 2010 aggregate account balance. An alternative separate 12.5% penalty will apply to taxpayers whose highest aggregate undeclared offshore amount was less than $75,000 in each of the years in question, including the fair market value of assets in undisclosed offshore entities and any foreign assets that were either acquired with improperly untaxed funds or produced improperly untaxed income. The new OVDI also provides for a special "mark-to-market" calculation for taxpayers' interests in "passive foreign investment companies" such as offshore hedge funds and offshore mutual funds. As stated above, unlike the original OVDI which ended October 15, 2009, the IRS will require a completed package (including complete and accurate amended United States federal income tax and informational returns) to be submitted by the August 31, 2011 deadline. Taxpayers with undisclosed offshore accounts or income should therefore initiate the voluntary disclosure process as soon as possible. Our website will provide information regarding additional OVDI developments. Taxpayers with undisclosed offshore assets may wish to contact Leslie A. Share, Dennis Ginsburg, Shawn P. Wolf, or Todd N. Rosenberg.
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1500 San Remo
Avenue |
Suite 125 |
Coral Gables, Florida 33146
750
South Dixie Highway |
Boca Raton, Florida 33432 |
Copyright ©2006 Packman Neuwahl & Rosenberg, P.A. All Rights Reserved. |
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