IRS Announces New Voluntary Disclosure Program for U.S. Taxpayers with Offshore Accounts

Client Advisory

February 10, 2011

The Internal Revenue Service on Monday, February 7, announced a new, and perhaps final, program to encourage voluntary disclosure of unreported offshore financial accounts. Eligible participants are assured that they will not be criminally prosecuted, and will be subject to stated civil penalties in lieu of all other potential penalties associated with such accounts and the unreported income therefrom. The new program expires August 31 of this year.

The new program is based closely on the previous one, which ended on October 15, 2009. Spurred by the publicity over the IRS’s successful efforts to obtain the names of U.S. taxpayers who held accounts at UBS, approximately 15,000 taxpayers filed under the old initiative. The IRS has subsequently broadened its investigation to include other banks in Europe and Asia. In order to be eligible to participate, a taxpayer must come forward before the IRS independently learns of the taxpayer’s overseas account.

Under the new program, taxpayers will generally be liable for a penalty of 25% of the highest balance in the unreported foreign account for the eight-year period 2003 to 2010. In addition, they will be liable for income tax on all unreported income for the same period, and a 20% penalty on the resulting tax deficiency. Under very limited circumstances these penalties may be reduced. The penalties for a taxpayer who does not voluntarily disclose are potentially much higher, even including criminal prosecution. 

Unlike the earlier program that merely required taxpayers to request admission into the program before the October 15, 2009 expiration date, the 2011 initiative requires that the taxpayer submit amended returns, and pay the taxes and penalties, by the August 31, 2011 termination date.

Carter Ledyard & Milburn LLP’s tax and white-collar lawyers have been actively assisting numerous taxpayers with undisclosed accounts. Many have availed themselves of the 2009 program, but we have counseled others to comply with their obligations outside the rigid program. Still others came to us after the cutoff date for the earlier program but may now be eligible for the new initiative. The Firm, together with the forensic accountants with whom we work, will continue to assist and advocate on behalf of taxpayers with undisclosed foreign accounts who wish to come into U.S. tax compliance. In order to participate in the new program, time will be of the essence.

Questions regarding this advisory should be addressed to Howard J. Barnet (212-238-8606, or Michael Shapiro (212-238-8676,

Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was 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. © 2021 Carter Ledyard & Milburn LLP.
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