Deadline Looms for Disclosure of Offshore Accounts

The Voluntary Disclosure Practice, or VDP, for any taxpayer who has a previously undisclosed and untaxed interest in a foreign account or entity is set to expire Sept. 23. The VDP provides taxpayers with a procedure pursuant to which they can make a voluntary disclosure of their direct or beneficial interest in a foreign account or entity so that they may become compliant with all federal tax and reporting requirements, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. The VDP is applicable to any individual, corporation, partnership, trust or other entity that is otherwise obligated to report and pay taxes on income earned on financial accounts maintained in foreign countries, either directly or through controlled foreign entities. The term “financial accounts” is broadly defined and includes most bank, brokerage and investment accounts.

The details of the VDP are contained in a variety of IRS releases including a “Frequently Asked Questions” document issued by the IRS and available at www.irs.gov. Taxpayers with questions about the VDP may also call the IRS Voluntary Disclosure Hotline at 215-516-4777.