In January of 2012, the IRS began another Offshore Voluntary Disclosure Program (OVDP) designed to collect taxes on unreported foreign assets. The OVDP was similar to those that the agency had announced in 2009 and 2011. The program offers individuals a chance to self-report income, which minimizes the potential criminal or civil penalties that they may be facing.
Recently, the Department of Justice filed a complaint to collect over $3 million from an individual with a Swiss bank account who tried to pay these taxes outside of the OVDP. The taxpayer was alleged to have failed to disclose his interest in the account, nor reported any of the income that he had earned from 2004 to 2007 on tax information submitted to the IRS. The man had filed amended tax returns and Foreign Bank and Financial Accounts (FBAR) for the years in question, but it is alleged that the failure to report the income was willful, which resulted in the extensive penalties.
The government is attempting to collect half of the balance of the man's account for the years in which taxes were not paid. It is uncertain whether these types of fines will become more common for those trying to pay past-due taxes outside of the OVDP, which could cause major problems for taxpayers with unreported foreign assets. The IRS can cancel the OVDP at any time, leading to potentially more penalties for those who have income to report.
Taxpayers with questions about the OVDP or any other tax issue may wish to speak to an experienced attorney about their specific situations. An attorney can help individuals decide the best way to come into compliance with the IRS, and the programs that may be available to minimize the penalties that they may face.
Source: Forbes, "DoJ files action to collect multiple 50 percent civil FBAR penalties," Charles Rettig, June 17, 2013.