The IRS is giving some taxpayers extra time to “come clean” about foreign bank accounts.
Alert: In new guidelines posted on its web site, the IRS has said it will postpone for up to 90 days the deadline for participating in its offshore voluntary disclosure program. The initial deadline was Aug. 31, 2011.
The IRS first announced the program in 2009 and granted leniency for 2003 through 2008. Thousands of wayward taxpayers stepped forward. The revised program enables taxpayers with hidden accounts to disclose unreported income for 2003 through 2010.
In addition to extending the amnesty deadline for taxpayers with accounts in places like Switzerland, the IRS has outlined a way to opt out of the program.
Note that opting out could increase or decrease tax liability. A central committee will review each case on its merits. If a taxpayer opts out of the program, he or she won’t be penalized.
Under the new program, an account holder may face criminal charges if the IRS discovers an account before it’s disclosed. A charge of tax evasion can result in a prison term of up to five years and a fine of up to $250,000.
The penalty for filing a false return is a prison term of up to three years and a fine of up to $250,000.
Tip: The top penalty in the 2011 program is 25% as opposed to 20% in the 2009 program. A new 12.5% penalty applies to taxpayers with small offshore accounts (i.e., those with balances of $75,000 or less).