News 24 Jun. 2021
Curtis successfully defends foreign states' procedural privileges in the UK Supreme Court
News 23 Jun. 2021
Ibrahim Elsadig joins Curtis as Partner in Dubai
News 09 Aug. 2021
Curtis, Mallet-Prevost, Colt & Mosle enters into association with Chevalier Law in Singapore.
Event 23 Apr. 2021
Partner Borzu Sabahi to speak on Damages, Enforcement and Annulment of Arbitral Awards at Executive Training Program hosted by the Government of India and the Indian Institute of Foreign Trade
Client Alert 18 Oct. 2021
Senior Associate Martin Wolff Discusses Practical Questions with Regard to the German Implementation of the EU Directive on Cross-Border Tax Arrangements (DAC6) in Institutional Money
News 18 Oct. 2021
Jan Krupski Joins Curtis as a Partner in Frankfurt
News 15 Oct. 2021
Claudia Frutos-Peterson and Elisa Botero Ranked Among the Top 100 Female Lawyers in Latin America by Latinvex
News 13 Oct. 2021
Curtis Joins The Appellate Project to Promote Appellate Practice to Diverse Law Students
Client Alert 15 Oct. 2021
Recent change in Dubai’s Arbitration Landscape.
News 20 Sep. 2021
Curtis Successfully Defends the Sultanate of Oman and Oman Aluminium Rolling Company LLC in U.S. Department of Commerce Trade Case
Client Alert 05 Oct. 2021
Proposed Legislative Changes to Federal Estate, Gift and Trust Taxation
Publications 22 Sep. 2021
Client Alert 24 Jun. 2021
U.S. Insight: Update on Virtual Notarization (Executive Order 202.7) During the COVID-19 (Coronavirus) Pandemic (Updated: June 24, 2021)
U.S. Insight: Update on Virtual Witnessing (New York Executive Order 202.14) During The COVID-19 (Coronavirus) Pandemic (Updated: June 24, 2021)
Publications April 2009
On March 26, 2009, the Internal Revenue Service (the 'IRS') announced that it has adopted a program to encourage taxpayers who have assets located offshore to voluntarily disclose both the assets and any income earned thereon (the 'VDP'). The VDP is available for the six-month period which began on March 23, 2009.
A United States taxpayer who has assets offshore: (i) generally must report, each year, information relating to the foreign financial accounts in which the assets are held on Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts ('FBAR'); and (ii) must pay federal income tax on income earned in such accounts. An FBAR must be filed each year in which the aggregate value of the taxpayer's foreign financial accounts exceeds $10,000. Taxpayers who fail to file an FBAR are subject to significant penalties that may equal or even exceed the value of the accounts. For each failure to file an FBAR, there are civil and, potentially, criminal penalties. A non- willful failure to file an FBAR may give rise to a civil penalty of up to $10,000 per year. In other situations, a taxpayer will be subject to a civil penalty equal to the greater of $100,000 or 50 percent of the value of the accounts. Under certain circumstances, an additional criminal penalty of up to $500,000 or 10 years in prison (or both) may be assessed.
In addition to the penalties for failure to file an FBAR, a United States taxpayer who fails to report and pay income tax on offshore income may be subject to penalties under the Internal Revenue Code. Such penalties include, among others, a delinquency penalty of up to 25 percent of the unpaid tax, and an accuracy penalty of 20 percent of the unpaid tax (which may be increased up to 75 percent for any part of the underpayment attributable to fraud).
Under the VDP, taxpayers may limit their exposure to the various penalties (as summarized below). To be eligible for the program taxpayers must, prior to September 24, 2009, (i) file an FBAR or amend any deficient FBAR for each of the last six years to report all foreign financial accounts, (ii) file a tax return or amend any deficient tax return for each of the last six tax years to report all income earned in such foreign financial accounts, and (iii) pay all taxes and interest due on income generated by assets held offshore during the last six years.
Provided that the taxpayer complies with the VDP requirements, the IRS may reduce the applicable penalties to the following:
However, there is no assurance that the IRS will grant these reduced penalties even if the taxpayer complies with the VDP requirements. A taxpayer whose name has been provided to the IRS by outside sources (e.g., a foreign bank) apparently may still qualify under the VDP if the IRS has not opened a criminal investigation of such taxpayer. Taxpayers will not be eligible for the VDP if they are currently under criminal investigation. Moreover, according to the IRS, 'a voluntary disclosure will not automatically guarantee immunity from prosecution; however, a voluntary disclosure may result in prosecution not being recommended. This practice does not apply to taxpayers with illegal source income.' See Internal Revenue Manual 184.108.40.206(2).
Taxpayers who seek to take advantage of this program should consult experienced tax advisors in regard to the requirements and implications of the voluntary disclosure program.
To ensure compliance with requirements imposed by the IRS, we inform you that, unless explicitly provided otherwise, any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
Marco A. Blanco
Eduardo A. Cukier