IRS Revises a Limited-Amnesty Program for Offshore Accounts


The Internal Revenue Service announced changes to one of its limited-amnesty programs for U.S. taxpayers with undeclared offshore accounts. The revisions are to the “streamlined procedure,” which was announced in June and is for taxpayers who weren’t intentionally hiding money abroad.

Participants in the streamlined program who live in the U.S. are eligible for a 5% penalty on the balance of undisclosed accounts, and participants living outside the U.S. may owe no penalty at all. By contrast, taxpayers in a different program who confess to “willfully” hiding accounts owe a 27.5% penalty.

Experts say the clarifications contain good news and bad news for U.S. taxpayers concerning the streamlined program. “The clarity is good, but some people who think they don’t deserve harsh treatment will wind up on the wrong side of the fence the IRS has erected,” says Phil Hodgen, an international tax lawyer in Pasadena, Calif.

The IRS issued the guidance in question-and-answer format. Seven new questions are for U.S. residents and clarify what assets are and aren’t subject to the 5% penalty. For example, the penalty doesn’t apply to assets, such as a bank account, for which the taxpayer had “signature authority” but not beneficial ownership—that is, the right to use the assets.

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