TAX AMNESTY PROGRAM
What is a tax amnesty program?
Tax Amnesty programs can offer full tax relief, but normally such a programs have an extremely short window of opportunity. The objective of an amnesty program is to enable the government collect as much tax revenue as it can within a short period. Usually this timeframe is two to three months. The benefits to paying taxes during such amnesty programs are so that the federal or state government can waive interest and penalties. The program also is a chance for taxpayers to make revisions file late returns or pay off the balance in full.
The Most recent amnesty program:
Update: The Wall Street Journal lately reported that over 16000 Americans took advantage of this last amnesty program for taxpayers with unnamed offshore accounts.
Here are some details on the program:
On February eight, 2011, the IRS announced an amnesty program referred to as 2011 Offshore Voluntary Disclosure Initiative (OVDI). The amnesty program was for taxpayers with secret foreign financial accounts, income or entities. This OVDI program limits penalties associated with the refusal to disclose assets, foreign accounts and foreign income. The 2011 OVDI limits taxpayers with secret offshore accounts and assets exposure to civil penalties. Outside the OVDI amnesty program, U.S. taxpayers found with unreported foreign accounts, unreported foreign income and undisclosed foreign assets face the likelihood of paying harsh penalties such as:
- penalty for refusing to report a foreign account which could be as high as $100,000 or 50% of the total balance of a foreign account in each year held
- fraud penalty equal to 75% of an unpaid tax
- Penalties for the refusal to file information returns.
The IRS extended the amnesty program’s time limit for offshore voluntary exposé initiative (OVDI) requests up to Sept. 9, 2011, because of the potential effects of Hurricane Irene on taxpayers.
There are numerous situations when offshore accounts may look favorable:
- Offshore limited liability companies and corporations are often set up for international trading and asset protection and can help manage taxes on foreign income. There are specific tax flexibilities and benefits that are allowed for these offshore accounts. It is best to seek advice from an IRS attorney to establish what legal benefits these accounts can offer.
- Trusts set-up offshore are typically part of an estate planning process and can help keep current and future creditors at bay. This is an perfect way to protect funds for family descendants and heirs. An offshore trust is beneficial, as it can remain confidential to other parties.
- Private foundations established offshore operate much in the same way as a trust, and operate like a company. If they are offshore, they can be confined against excess taxation and the claims of creditors.
If you have questions concerning a future or prior IRS tax amnesty program, any of our IRS tax attorneys can offer you with a free one on one consultation to discuss your options. Contact us today at 310-883-7930.