January 1, 2013 is the effective date of the Foreign Account Tax Compliance Act (FATCA) and with its implementation the associated FATCA disclosures. FATCA ends historical bank secrecy as previously relied on by many US depositors.
In anticipation of FATCA implementation, the IRS, revised its Frequently Asked Questions (FAQs), clarifying many uncertainties in the current OVDP, tightening some areas and relaxing others. In addition, the IRS released, updated versions of some of the documentation that taxpayers will be required to file as a part of their acceptance into the OVDP.
The clarifications establish that the OVDP is available to taxpayers who have both offshore and domestic issues that require disclosure. Additionally, the IRS clarified which years are to be included or covered in the required eight-year voluntary disclosure period: for taxpayers who submit voluntary disclosures prior to the due date or extended due date for 2011, the disclosure period includes 2003–2010. For taxpayers who submit disclosures after the due date or extended due date for 2011, the disclosure period is 2004–2011.
The IRS added two new categories of persons ineligible for the OVDP. Under the OVDP, a taxpayer is required to notify the U.S. Attorney General of any appeal or document submitted in connection with an appeal of a foreign tax administrator's decision to provide account information to the IRS and any such a person who fails to provide the required notice will no longer be eligible to make a voluntary disclosure. Second, the IRS may announce that certain taxpayer groups that have or had accounts at specific financial institutions will be ineligible due to U.S. government actions in connection with the specific financial institutions. Each announcement is to provide notice of the prospective date upon which eligibility for the specific taxpayer group ends.
The IRS also revised certain documentation, the Offshore Voluntary Disclosure letter used to make the formal application to the OVDP has significantly changed and now has a required attachment/questionnaire which, to some extent, replaces an earlier document known as the Foreign Financial Institution Statement and further expands upon the details of the offshore account and the persons involved in the creation of the account. The disclosure letter and the attached questionnaire now call for information regarding deposits/withdrawals, entities affiliated with the account, and a host of information relating to communications with representatives of the foreign financial institution.
The OVDP in response to situations involving U.S. citizens,including dual citizens, residing abroad added two new provisions.The first, which previously posted as Tax amnesty offered to Americans in Canada, describes the IRS giving Canada persons the opportunity to request an extension of time to make the election to Canada to defer U.S. income tax on income earned in, but not yet distributed from, Canadian registered retirement savings plans (RRSPs), pursuant to the U.S.-Canada Income Tax Treaty. If the election is granted, the RRSP balance will not be included in the offshore penalty base upon which the 27.5% penalty attaches.
The second which previously posted as Instructions - New Streamlined Filing for Non-Resident & Non-Filer U.S. Taxpayers! which describes the IRS' new procedure (to take effect September 1, 2012) that will allow U.S. citizens, including dual citizens, residing abroad to become tax-compliant, without necessarily facing penalties, if they are low-compliance risk taxpayers who owe little or no back taxes (generally, those persons who have simple tax returns and owe $1,500 or less in tax for each of the covered years).
If you have unreported income from Foreign Banks and you want to Get Right with the IRS, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).
Read more at: Tax Times blog