It’s not too late to enter the IRS 2011 Offshore Voluntary Disclosure Initiative (or OVDI). The program runs through August 31, 2011, offering what IRS Commissioner Shulman called the “last, best chance” to come clean. The IRS’s 2009 offshore disclosure program netted about 15,000 taxpayers. See IRS Sets Offshore Amnesty, Part II. Since then, 3,000 more came in under the IRS’s one-off system of voluntary disclosure. See Q&A 19.
Who? First, you must report worldwide income, even earnings taxed abroad. If you have foreign bank accounts with an aggregate balance of more than $10,000 at any time during the year, you must check the “yes” box on your IRS Form 1040 disclosing it. Plus, you must file an FBAR annually (Treasury Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts). You could hope you’re never discovered.
However, you risk big civil and even criminal penalties. Plus, if you never file the forms, the statute of limitations never runs out. Meanwhile the IRS is getting more and more data from foreign governments and institutions to ferret out holdings by U.S. persons. That makes disclosure a good idea.
