Extension of Voluntary Disclosure deadline to September 9

By:  Sherwin P. Simmons, II, Esq., Drew LaGrande, Esq., 

Jonathan Gopman, Esq. and Barbara Ruiz-Gonzalez, Esq.

The IRS just announced at 5:45 pm EST that the Voluntary Disclosure deadline has been extended to September 9, 2011.  The reasoning provided is the potential impact of Hurricane Irene.  All deadlines have been moved to September 9 and no additional steps must be taken in order to obtain this extended deadline.
Thus, all complete submissions now need to be received by the IRS on September 9 and not August 31 and all extension requests now need to be received by the IRS on September 9 and not August 31.
Additionally, the IRS clarified guidance as to the Voluntary Disclosure Letter stating that as much of the information for the Letter as possible should be submitted by September 9 and the Letter must be updated at a later date.

Conversation Starters for Seniors and their Children

Please join me tonight at Pinecrest Place for a presentation on Conversation Starters for Seniors and their Children.  If you have ever had trouble communicating with your aging parents, come to Pinecrest Place and learn about the “40-70 Rule.” This means that if you are around 40 and your parents are around 70, it’s time to start talking about certain senior topics. This informative seminar, presented by four experts in the fields of retirement living, finance, law and pre-planning, will help the adult children of aging parents pave the way for better communication and a more fulfilling relationship. Learn about options in retirement living, strategies on how to pay for it, get a check list of what documents you need to protect your interests, and finally, how to make the last days easier by pre-planning funeral arrangements.


While you’re here, you’ll enjoy heavy hors d’oeuvres, beverages and mingle with other professionals before the presentation. Come prepared to ask questions and then leave with a check list of things to do to help you and your parents prepare for their future, and yours!  Hor d' oeuvres begin at 5:30 pm and the presentation begins at 6 pm.

Seating is limited so call 727-581-8142 to R.S.V.P. or for directions.

JUST THE FAQs PLEASE, The IRS has updated guidance on the Offshore Voluntary Disclosure Initiative

By: Sherwin Simmons, Drew LaGrande and Barbara Ruiz-Gonzalez

Tampa, Florida

On June 2, the IRS updated the frequently asked questions (FAQ) related to the 2011 Offshore Voluntary Disclosure Initiative (OVDI).  The OVDI, which was originally announced February 8, 2011, provides an opportunity for taxpayers to disclose previously unreported offshore assets in exchange for a 25% penalty (or in some cases, a 5% or 12.5% penalty) on the highest amount of the assets between 2003 and 2010, payment of unreported taxes and interest for the tax years 2003 through 2010 and various other civil penalties.

90-Day Extension to Submit Documents
The updated FAQ’s provide(i) for a 90-day extension period for taxpayers wishing to comply that are unable to make the August 31 deadline, so long as the taxpayer makes a good faith attempt to comply and can explain which items are missing and why; (ii) compare in detailed explanations, the penalties that would potentially apply to taxpayers participating in the initiative versus with those penalties that would potentially apply to taxpayers that “opt-out” of the initiative; and (iii) and most importantly, provide an additional reduced penalty for US persons who are living outside the US.

The 90-day extension is not a blanket extension of the deadline for the OVDI.  It is in fact, a completely discretionary extension as determined by the IRS for taxpayers pre-cleared in the OVDI who need additional time.

The IRS stated that a taxpayer may request an extension of the August deadline to complete the OVDI submission if, and only if, the taxpayer can demonstrate a good faith attempt to fully comply on or before August 31, 2011.  The good faith attempt to fully comply must include the properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess Report of Foreign Bank and Financial Accounts (FBAR) penalties.

Written requests for up to a 90-day extension must include a statement of those items that are missing, the reasons why such items are missing, and the steps taken to secure them.  In addition, the submission must include copies of filed original and amended income tax returns, various completed information forms required by the OVDI, and in some cases, copies of offshore financial account statements.

A taxpayer wishing to be a part of the OVDI after August 31, 2011 does not benefit from the 90-day extension.

New Opt Out and Removal Guide
As part of the updated guidance, the IRS also provided a new Opt Out and Removal Guide (“Guide”) that includes steps that should be taken before and after opting out or being removed from the OVDI.  This Guide includes sample letters, a rundown of penalties that may apply to a taxpayer, and a list of possible exceptions to the three-year statute of limitations for individuals who have opted out or have been removed from the OVDI.

Opting out of the OVDI is an irrevocable election by a taxpayer to have his or her case handled under the standard IRS audit process. Removal from the OVDI, in contrast, is a determination made by the IRS to remove a taxpayer from the OVDI. In both situations, an examination is immediately initiated.

Under the procedures outlined in the Guide, a centralized review committee will make a determination as to whether the case merits a normal examination, should be reassigned to a Special Enforcement Program agent, or should receive some other treatment. The Guide states that the review committee will decide the appropriate level of examination, keeping in mind that the taxpayer is not to be viewed in a negative light for opting out of the OVDI.  The IRS described in the Guide several scenarios in which a taxpayer might wish to opt out from the OVDI.

The Guide also states that the review committee will consider the apparent severity of the results under the OVDI and the cooperation of the taxpayer, including whether removal was under consideration at the time of opt out.  The Guide further states, that all committee decisions are final.

A taxpayer should fully explore all results and options prior to opting out of the OVDI.

Dual Resident Penalty Reduction
Additionally, the OVDI was modified to include a reduction of the 25% offshore penalty to 5% if certain requirements are met.

This relief is only available to taxpayers who meet all of the following requirements during all years of the OVDI: (i) resided in a foreign country; (ii) were in compliance with the tax laws of their resident country; (iii) had $10,000 or less of U.S. source income each tax year; and (iv) any offshore-related taxable income not reported on the individual's U.S. tax return must have been reported on the individual's income tax return filed with their resident foreign country.

If such requirements are met, the taxpayer would be eligible for a reduced 5% offshore penalty that would apply only to the value of their foreign financial accounts.

The June update to the OVID has provided some additional tools for taxpayers with respect to the OVDI.  It has provided reduced penalties in very specific situation and guidance on opting out of the OVDI.  Although the update provides for an extension of time to the August 31, 2001 deadline, taxpayers should be weary of its use and benefit, considering the discretionary approval process by the IRS and a showing of a good faith attempt to comply with the deadline.

2010 FOREIGN FINANCIAL ACCOUNT REPORTING REQUIREMENTS

By: Sherwin Simmons, II and Drew LaGrande

Tampa, Florida

U.S. citizens or residents who owned, directly or indirectly through an entity, or who had power of attorney/signature authority over one or more foreign financials account with an aggregate value exceeding $10,000 at ANY point in time during 2010 may be required to report such foreign financial accounts. The definition of a reportable foreign financial account includes any investment account, brokerage account, certain pension funds, cash value life insurance or annuity policy, mutual fund, some commodity accounts, and other types of foreign financial accounts.

U.S. citizens and residents with a reportable foreign financial account are required to file a Form TD F 90-22.1 (FBAR). The due date of the FBAR is June 30th. Unlike other IRS forms, the FBAR MUST be received by June 30th, not mailed June 30th.

Published IRS guidance also allows for U.S. citizens and residents who have reported and paid all their worldwide taxable income for tax years 2003 through 2010 but who failed to file FBARs for those tax years, to file such FBARs by June 30th without any exposure to penalties. U.S. citizens and residents who have not reported and paid all their worldwide taxable income for tax years 2003 through 2010 should NOT file any FBARs by June 30th without seeking proper legal advice.

The IRS published new guidance on the reporting of foreign financial accounts on February 24, 2011 which further broadens the definition of a foreign financial account and who is responsible for filing an FBAR. Due to the overwhelming penalties, we highly recommend that all U.S. citizens or residents holding an asset offshore seek proper legal advice to determine if they now possess an FBAR filing obligation.

The Tax Man Cometh – The New IRS Off-Shore Voluntary Disclosure Initiative

By: Sherwin P. Simmons, II and Drew LaGrande

Tampa, Florida

On February 8, 2011, the IRS announced the 2011 Offshore Voluntary Disclosure Initiative (the “2011 VDI”). The 2011 VDI provides a new framework allowing taxpayers with undisclosed offshore personal and business assets a mechanism in which to disclose the undisclosed offshore assets with limited exposure to criminal prosecution and civil penalties. In response to the 2011 VDI, IRS Commissioner Douglas Shulman urged, “For those hiding cash or assets offshore, the time to come in is now.” The 2011 VDI is available through August 31, 2011 only. Taxpayers with undisclosed offshore personal and/or business assets must act quickly.

Under the 2011 VDI, taxpayers with undisclosed offshore assets have an opportunity to avoid criminal prosecution so long as the proper procedures are followed. These procedures include the following:

     (1) File Amended Tax Returns for tax years 2003 though 2010 reporting previously undisclosed offshore income;

     (2) Pay applicable income tax resulting from such undisclosed offshore income along with interest resulting therefrom;

     (3) File all Informational Returns applicable to the undisclosed offshore assets for tax years 2003 through 2010;

     (4) Pay an accuracy-related penalty based on the additional income tax;

     (5) Pay a failure to file and/or failure to pay penalty, if applicable; and

     (6) Pay a penalty of 25% of the highest aggregate balance of the undisclosed foreign financial accounts and/or assets during tax years 2003 through 2010. In certain limited circumstances, taxpayers may be eligible for a reduced penalty of 12.5% or even 5%.

The 2011 VDI is the IRS’ second amnesty program focused on undisclosed offshore assets. The IRS provided for a similar voluntary disclosure program in March of 2009 which resulted in 15,000 voluntary disclosures before the program ended in October 2009. Since October 2009, an additional 3,000 taxpayers have come forward to disclose their offshore financial assets. The 2011 VDI will cover those 3,000 taxpayers.

The overall penalty structure of the 2011 VDI is slightly higher than the previous 2009 amnesty program. Taxpayers who did not participate in the voluntary disclosure program in 2009 will not be rewarded by the IRS for waiting to come forward.

To see the IRS' announcement, click here

The advantages and disadvantages of the 2011 VDI should be carefully analyzed based upon each taxpayer’s particular circumstances. Sherwin Simmons and Drew LaGrande have a long history of representing clients in international tax controversy matters, including a significant number of voluntary disclosure matters. Sherwin P. Simmons, II can be reached at (813) 209-5039 and Drew LaGrande can be reached at (813) 209-5063. We are ready to provide immediate assistance with 2011 VDI matters.