Update: Here is a list of the submission requirements for the Offshore Voluntary Disclosure Program in 2012.
Offshore Voluntary Disclosure Program (OVDP)
The IRS recently reported that they had received 15,000 applications for the Voluntary Disclosure Program (“VDP”) while the program was officially open and another 3,000 since the program was closed late in 2009.The Voluntary Disclosure Program allows US taxpayers to confess to having unreported overseas bank accounts. The IRS and the Department of Justice worked together to aggressively uncover taxpayers with overseas account by targeting the Swiss bank account system, and in particular UBS, which has a large US operation. By “convincing” UBS and the Swiss banking authorities to unlock the previously confidential and sacrosanct vaults of the world’s confidential bankers, the IRS was able to encourage 18,000 US taxpayers to come forward before, and perhaps because, they could get uncovered.
By applying for the VDP program taxpayers were afforded the opportunity to get out from under potential criminal penalties. That, as it turns out, and not surprisingly, proved to be a very attractive offer to many, regardless of the potential cost in penalties and additional tax.
The accuracy related penalty under section 6662 of 20 percent is calculated based on the highest amount in the unreported bank account (or securities account) during the reporting period. This can look expensive, particularly given that the exchange rate between the Euro and the Dollar almost reached parity by the end of 2007 (thus increasing the value of a Euro account in dollar terms, even if the taxpayer did nothing to the account), my experience with taxpayers is that is a small price to pay for piece of mind.
So far my experience is that the IRS has been fair when calculating the size of the account, if for example the same money was moved between more than one account.
So if you own a foreign bank account and you haven’t filed Form TD F 90-22.1 every year, you have an UNREPORTED foreign account. If you do have an unreported account, its still not too late to buy yourself some piece of mind. However if the IRS contact you first it will be too late to seek the coverage of the VDP, and an audit will definitely follow and criminal sanctions are potentially looming.
The IRS has indicated they intend to continue to aggressively target banks, advisers, promoters and taxpayers. So that means if your bank or adviser is targeted, the IRS could follow the piece of string that leads to you, the taxpayer. I encourage you to speak to an experienced federal and Massachusetts tax attorney to talk about your options.