Similar to the 2009 and 2011 OVDI, this program addresses the civil side of a taxpayer’s voluntary disclosure of foreign accounts and assets. It also defines the number of tax years covered and sets the civil penalties that will apply.
Unlike the 2009 OVDP and the 2011 OVDI, there is no set deadline for taxpayers to apply. However, the terms of this program could change at any time going forward. For example, the IRS may increase penalties or limit eligibility in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point. Taxpayers should prioritize compliance to take advantage of the 2012 program and avoid possible IRS increases in penalties in the future.
As previously mentioned, a new procedure has been established for current non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns to file their delinquent returns. This procedure will go into effect on Sept. 1, 2012.
Taxpayers who utilize the new procedure will be required to file delinquent tax returns, with appropriate related information returns, for the past three years and to file delinquent FBARs for the past six years.
In addition, retroactive relief for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by relevant treaty will be available through this process. The proper deferral elections with respect to such arrangements must be made with the submission.
All submissions will be reviewed, but the intensity of the review will vary according to the level of compliance risk presented by the submission.
It is important to note that when a taxpayer truthfully, timely, and completely complies with all provisions of the voluntary disclosure practice or the new procedure for current non-residents, the IRS will not recommend criminal prosecution to the Department of Justice.