If I learned nothing else from the movie The Firm — and I didn’t — it’s that there are substantial tax savings to be found by shifting assets away from the U.S. to foreign tax havens.
To curb these abuses, the IRS previously established an offshore voluntary disclosure program whereby U.S. citizens could fess up concerning their offshore stashes and avoid the criminal prosecution that would have resulted had the IRS found them first. The most recent program expired in 2011.
Yesterday, the IRS brought back the offshore voluntary disclosure program for a third time. U.S. citizens will once again have the opportunity to declare previously hidden assets and avoid criminal prosecution, though participants will be required to pay a penalty of 27.5% of the highest balance in their offshore assets or bank accounts.
With the IRS aggressively pursuing those foreign banks and individuals who facilitate the shifting of assets from the U.S. to foreign soil, the renewal of the voluntary disclosure program may well compel U.S. citizens to disclose those assets before the IRS finds them.
At the moment, the IRS is saying that the program will be open indefinitely, while providing incentive to act soon by hinting that the 27.5% penalty could soon increase.