Federal Tax Alert: Due Date Extended For 2011 Offshore Voluntary Disclosure Initiative to Sept. 9

The Internal Revenue Service announced on February 8, 2011, a new offshore voluntary disclosure initiative (“OVDI”) to encourage individuals with undisclosed income from hidden offshore accounts to get current with their federal tax obligations. Taxpayers who otherwise qualify for the voluntary disclosure initiative can avoid uncertain criminal or severe civil penalties by taking advantage of the Service’s new initiative.

On August 26, 2011, the Service extended the original August 31, 2011 deadline to September 9, 2011, in anticipation of the impact of Hurricane Irene. The extension of time applies to (1) those taxpayers seeking a voluntary disclosure agreement, and (2) those taxpayers with no underreported income but with missed foreign bank account reporting forms and similar foreign reporting forms being filed under FAQ 17 and/or 18 of the OVDI. The forms contained in this second category include Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (the so-called FBAR form); Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations; and Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. The Service’s notice extending the deadline can be found at www.irs.gov/newsroom/article/0,,id=234900,00.html?portlet=7.

The Service last updated the FAQs relating to the initiative on June 2, 2011, providing limited relief for certain taxpayers. Under FAQ 25.1, if it is not possible for a taxpayer to make a complete submission by the (then) August 31, 2011deadline, the Service may allow a 90-day extension of time to file if a request is made by the taxpayer and the taxpayer can demonstrate a good-faith attempt to fully comply with the initiative on or before the deadline. For purposes of FAQ 25.1, the demonstration of a good-faith attempt to comply must include the proper completion of signed agreements to extend the time period for assessing tax and assessing FBAR penalties. The request for extension must be accompanied by a statement that lists the items that are missing, the reasons why they are not included, and the steps taken to secure them. All requests for extension were previously required to be made in writing and sent to the Austin Campus of the Service on or before August 31, 2011.

Pursuant to the August 26, 2011, notice and revised FAQ 25.1, any requests for a 90-day extension must be made by the new September 9, 2011 deadline.

*Content provided courtesy of BDO USA, LLP.