The IRS announced on 2 June that it will offer a 90-day extension on the deadline to participate in the 2011 offshore voluntary disclosure initiative to taxpayers who have made a ‘good faith’ attempt to comply by the original deadline of 31 August but are unable to submit all of the required documentation.
It is the aim of the disclosure initiative to bring taxpayers with previously undisclosed foreign accounts or foreign entities into compliance with US tax law. While a full voluntary disclosure will eliminate the risk of criminal prosecution and potentially reduce civil penalties, the initiative is not an amnesty and certain civil penalties for both income tax reporting and Foreign Bank Account Reporting violations will apply.
The deadline extension announcement was made in an update to the questions and answers provisions explaining the initiative on the IRS website. Good faith in the context of the disclosure initiative must include the completed and signed agreements to extend the period of time to assess tax, tax penalties and FBAR penalties.
Any request for a deadline extension must name the missing items, the reason they are missing and the steps that have been taken to secure them. The Q&A provisions were also updated with respect to the disclosure initiative process, case resolution and the calculation of the offshore penalty.
Cantor & Webb attorney Steven Cantor said, “What the IRS has come out with is an announcement that essentially says, as long as by August 31st you have made a good faith effort to produce as much as you possibly can, then we will grant you up to a 90 day extension.”
Mr. Cantor said the message that people in Cayman ought to derive from this announcement is that it is better to come forward.
“It is better to go knocking on the IRS’ door than to stick your head in the sand.”
If a taxpayer lets this opportunity to come forward pass, he said, the IRS is much less likely to be lenient in the future because there will be no more reasonable cause for not declaring offshore accounts or income.
“There is no instance where you should not come forward if you have undisclosed income and undisclosed bank accounts,” said Mr. Cantor, who also has clients in the Cayman Islands.
“When FATCA is coming in effect 1 January, 2013, there will be no place to hide anyway, so you might as well come clean now.”
“There is no instance where you should not come forward if you have undisclosed income and undisclosed bank accounts.”
Steven Cantor, partner, Cantor & Webb
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One can appreciate that some of these people might be a tad short of documentation!! Perhaps their lawyers can substitute a few papers for them.