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Update: IRS approach to the Voluntary Disclosure Program of 2012

In a recent American Bar Association webcast officials from the IRS discussed recent developments in its international tax enforcement activities.

Voluntary Compliance Programs
Programs during 2009 and 2011 netted the IRS $5 billion.  The current 2012 program currently has no fixed “end date”, but this may at some point be closed by the IRS.

The 2009 fixed penalty was 20%; the 2011 penalty was 25%; and the fixed penalty under the current program is 27.5%.
The current program, however, recognizes that certain long-term foreign residents may have a basis for their non-compliance.  This would include what are referred to as “accidental Americans.”  If these individuals can show “reasonable cause” for their non-compliance, the fixed penalty can be reduced to 5%.
The current program also provides for a reduced 12.5% penalty for those individuals whose foreign accounts have not exceeded $75,000.

Private Banking
The IRS is now actively reviewing information received from the Swiss bank UBS and has begun the process of gaining information under what is called a John Doe summons, issued to HSBC.

Court Cases
The IRS has been successful in recent court cases involving the imposition of penalties relating to failure to file the FBAR.

Tax Information Exchanges
The US is increasing the number of its Tax Information Exchange agreements in addition to the information exchange agreements in many of the US double tax treaties.

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