Well, the rumors were true. IRS has announced a third program to assist people with unreported offshore accounts to come forward and get current on their US reporting obligations, subject to penalties.

Interestingly enough, unlike the previous programs that IRS had conducted in 2009 and 2011, this new initiative does not contain a deadline. With that said, the current terms of the new program, and even its future existence, can be changed solely with the IRS’ discretion.

The penalty regime under the new program is very similar to what existed under the 2011 initiative. However, the penalty on the highest aggregate account balance in the taxpayer’s foreign bank accounts during the years in question has been increased from 25% to 27.5%. Individuals with offshore accounts or assets with a value of less than $75,000 in any calendar year could qualify for a lower 12.5% penalty. In some narrow circumstances, taxpayers could even qualify for a 5% rate. As an example, foreign residents who were unaware that they are US citizens might qualify for this 5% rate.

Those who come forward under this new initiative will need to file all original and amended returns for the affected years and pay any tax and related interest for up to eight years. Accuracy and/or delinquency penalties can also apply.

If you have any questions, please don’t hesitate to contact Paul Oliveira or Norman Leblanc.