We’ve blogged often about the IRS Offshore Voluntary Disclosure Program (check the index for a full list). One of recurring topics has been that since the IRS reserves the right to make changes to the details of the program, it is likely in taxpayers’ best interest to look into the OVDP sooner rather than later. Already once since the program began, for example, the IRS has increased the penalty rate paid by those participating in the program.
One change the IRS has made to the OVDP since its inception is to identify situations in which taxpayers pay a higher penalty than the norm for the OVDP. The current OVDP penalty rate is 27.5%. By comparison, the penalties for failure to disclose foreign accounts or assets outside of the program can be as high as 50% and can involve criminal charges and possible jail time. In some cases, in the so-called streamlined OVDP, which is available only for taxpayers whose failure to report was unwillful, the penalties are lower, but the standard for the program is currently 27.5%. In the case of certain banks, however, the penalty even in the OVDP is 50%. Specifically, if a taxpayer in the OVDP has undisclosed accounts at any of the banks on the IRS’s list, they incur the increased penalty on all their accounts, not just those at the specific institution. Participation in the program still prevents criminal prosecution.
Ten of these banks have been on this list since August 2014. The IRS recently added the final two, bringing the total to the following twelve banks:
- UBS AG
- Credit Suisse AG, Credit Suisse Fides and Clariden Leu Ltd.
- Wegelin & Co.
- Liechtensteinische Landesbank AG
- Zurcher Kantonalbank
- swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd. and swisspartners Versicherung AG
- CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries and affiliates
- Stanford International Bank, Ltd., Stanford Group Company and Stanford Trust Company, Ltd.
- The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
- The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries and affiliates
- Sovereign Management & Legal, Ltd., its predecessors, subsidiaries and affiliates (effective 12/19/14)
- Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A. and Bank Leumi USA (effective 12/22/14)
This list has come to be largely thanks to FATCA (that’s the Foreign Account Tax Compliance Act), a 2010 law that empowers the IRS to enter into information sharing agreements with foreign governments or foreign financial institutions directly. The aim is to gather information on undisclosed accounts and assets held by US depositors.
The silver lining is that the above list does not apply to taxpayers who participate in the streamlined OVDP, which includes a much lower penalty of 5%.
Horowitz Law Offices has represented numerous clients in connection with the IRS’s offshore disclosure programs since their inception. You are welcome to contact us at (312) 787-5533 or firstname.lastname@example.org