On 9 January 2012, the IRS (Internal Revenue Service) opened the third Offshore Program (OVDP). The program will run for an undetermined period. However, the IRS reserves the right to make changes (e.g. concerning penalties) or end the program at any time.
The program again offers the opportunity to undertake a voluntary disclosure in case US tax obligations have not been fulfilled or have only been partially fulfilled.
The third Offshore Program is based heavily on the second Offshore Initiative (OVDI) of 2011, in particular insofar as penalties are concerned. Penalties will only be increased at the highest penalty category from 25% to 27.5% of the greatest value of money held abroad in the last eight years.
Under the new OVDP the lowest penalty rate also remains at 5% of the greatest value of money held abroad. This penalty rate can be applied under certain conditions, in particular the person liable to tax may not be resident in the USA, must have met all his tax liabilities in his country of domicile (e.g. Switzerland) and his income from US sources must be less than USD 10,000 per annum. These requirements must be fulfilled during all the years affected by the OVDI/OVDP.
The IRS is apparently developing particular rules for those US taxpersons who have violated the obligation to file a tax return but who do not owe any taxes.
Further details should follow in the coming weeks.
US citizens and green card holders livng outside the US or with specified foreign financial assets will have to file a new form 8938 with their 1040's by April 15, 2012 if they meet the requirements.
US tax persons once again had the opportunity to voluntarily declare previously undisclosed assets and income through
September 9, 2011. If certain documents were sent to the IRS (Internal Revenue Service) until September 9, 2011, up to a 90 day extension of the deadline could be requested to complete the submission.
Taking advantage of the OVDI 2011 is strongly recommended because it must be assumed that - following the introduction of FATCA - all US accounts and safekeeping accounts from US tax persons must be reported by financial service providers outside of the USA provided certain thresholds are exceeded.