From the IRS
The IRS has announced that it is starting a new program designed to bring money held in foreign accounts back into the U.S. tax system and to help taxpayers with income from offshore accounts comply with federal tax law (IR-2011-14).
The new 2011 Offshore Voluntary Disclosure Initiative will run through August 31, 2011. It is modeled on the IRS’s first offshore voluntary disclosure program, which ran in 2009. The first program resulted in voluntary disclosure by some 15,000 taxpayers. The IRS reports that another 3,000 have come forward since the end of that program.
The 2011 program handles penalties differently than the first program did, and it requires participants to report and pay taxes for eight years instead of the six years required in the first program. Under the 2011 program, the penalties will be 25% of the highest aggregate account balance in the taxpayer’s foreign bank accounts during the years 2003–2010.
Individuals with offshore accounts or assets of less than $75,000 in any calendar year covered by the 2011 initiative will qualify for a 12.5% penalty rate. Some taxpayers will qualify for a 5% rate, but only in narrow circumstances, including the case of foreign residents who are unaware that they are U.S. citizens.
Participants in the program must pay back taxes and interest for up to eight years and also pay accuracy-related and/or delinquency penalties. They must file all original and amended tax returns for the affected years and include payment for taxes, interest, and accuracy-related penalties by the August 31 deadline.
The IRS has also issued 53 questions and answers that give extensive details about the 2011 program and about the civil and criminal penalties that may apply to taxpayers who do not come forward voluntarily.
For more details, see Tax Practice and Procedures, "Offshore Voluntary Disclosure Initiative."