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IRS Commissioner Doug Shulman's Statement on the 2011 Offshore Voluntary Disclosure Initiative

Feb. 8, 2011

Today, we are announcing the details of a new voluntary disclosure program that’s designed to get people hiding assets offshore back into the U.S. tax system.

As we continue to amass more information and pursue more people internationally, the risk to individuals hiding assets offshore is clearly increasing. This new effort gives those hiding money in foreign accounts a tough, fair way to resolve their tax problems -- once and for all. It gives people a chance to come in before we find them.

Some people may wonder why we’re offering another voluntary disclosure program after we ended the last one in October 2009. Let me explain why. Our primary goal is to have long-term voluntary compliance with our nation’s tax laws.  We owe that to the honest Americans who pay their taxes every year.  After our last program closed in October 2009, we have continued to see interest from people looking for a way to get back into the tax system.

In our 2009 program, we had 15,000 disclosures from around the world. Since the program ended, we’ve had more than 3,000 taxpayers come in through our ‘regular’ voluntary disclosure program. And we believe there are more people out there who will come in if we provide certainty with regard to their treatment.

So we are opening up a new program. This one is called the 2011 Offshore Voluntary Disclosure Initiative, or our shorthand is “OVDI.”

The new initiative differs in critical ways from the 2009 program. We learned a lot from our last effort, and we are incorporating this learning into the 2011 initiative.

Before I outline the basic structure of the initiative, let me make clear that people who waited out the 2009 initiative will not be rewarded for waiting. Make no mistake, this program contains a tough set of guidelines.

Let me outline the key terms of the initiative:

First, participants must pay back-taxes and interest for up to eight years. And they have to pay accuracy-related and / or delinquency penalties.

In addition to back taxes, interest, and regular penalties; the new penalty framework also generally requires people to pay a penalty of 25 percent of the amount in the foreign bank accounts. That penalty applies to the year with the highest aggregate account balance between 2003 and 2010. For comparison, the highest penalty rate in the 2009 program was set at 20 percent, and the new initiative is set at 25 percent.

Similar to the 2009 initiative, taxpayers can qualify for a  5 percent of account balance penalty in limited situations. 

For the 2011 initiative, there’s also a new penalty category of 12.5 percent for smaller offshore accounts. People whose accounts or assets were under $75,000 will qualify for this lower rate. 

For those hiding assets offshore, there is an obvious reason to come in now.  If we find you, you face harsher penalties and the possibility of jail time.  If you come in voluntarily, you pay a steep price but avoid going to jail.

And I offer a word of advice to procrastinators. The deadline for this program is Aug. 31. But the deadline means a different thing for the 2011 initiative than it did for the 2009 initiative. You will need to provide all of your paperwork by Aug. 31.  You can’t have a sudden revelation on the morning of Aug. 31 and jump into this program in the final hours.

The Aug. 31 deadline means that you need to have filed everything by then. You need your tax returns, your paperwork -- and you need to write a check by that time to the U.S. Treasury. So people should start now – not in August.

We have been getting better and better at detecting offshore accounts—therefore the risk of being caught is increasing.  We now have a number of other banks under investigation, based on information we received from our first round of disclosures and from other sources.  Tax secrecy continues to erode. And starting in a couple of years, new laws will come into affect that will give us more information than ever on offshore holdings.  As I’ve made clear throughout my tenure as IRS Commissioner, we are not letting up on pursuing offshore tax evasion, and there’s going to continue to be more in the works.

For those hiding cash or assets offshore, the time to come in is now. The risk of being caught will only increase.

Page Last Reviewed or Updated: 05-Dec-2013