Hurricane Irene Affects IRS Deadline for Disclosure of Foreign Bank Accounts

Steve D'Amato, CPA, Tax Senior Manager   email 
September 2011

 Though Hurricane Irene has dissipated, her affects are still being felt all across the country. Hurricane Irene's destructive power has even affected the Internal Revenue Service (IRS) by forcing an extension of the deadline for the 2011 Offshore Voluntary Disclosure Initiative (OVDI). 

In February 2011, the IRS announced that taxpayers had the opportunity to participate in a new voluntary disclosure initiative.  The initiative allows taxpayers to:

• divulge the details and nature of undisclosed foreign and offshore bank and other financial accounts (often referred to as FBAR, for foreign bank account reporting)

• report the taxable income from these accounts; and

• get current with their federal income tax obligations. 

ODVI is the second such program initiated by the IRS in the past two years. This is due in part that the IRS has recently focused its efforts and cracked down on taxpayers' undisclosed foreign accounts.  

Taxpayers participating in this initiative must file all original and amended federal income tax returns for up to eight tax years (2003 to 2010), along with the payment of all the related taxes, interest and penalties. Participants are subject to a penalty of 25percent on the highest aggregate account balance for all their offshore accounts since 2003. 

On August 26, 2011, due to the impact of Hurricane Irene, the IRS announced that it has extended the due date of the OVDI requests until Friday, September 9, 2011, from the original due date of August 31, 2011. Taxpayers with affected accounts that have not yet submitted their OVDI request must take one of the following two actions before Friday, September 9, 2011:

1.  A taxpayer must submit certain identifying information to the criminal investigation office. The taxpayer should include their name, address, date of birth, Social Security number and as much of the other information requested on the three-page Offshore Voluntary Disclosures Letter as possible. This information must be sent to:

Offshore Voluntary Disclosure Coordinator
Arch Street, Room 6404
Philadelphia,  PA   19106

2. The taxpayer may request up to a 90-day extension to submit a completed voluntary disclosure. The taxpayer must submit their name, address, date of birth and Social Security number, along with any other pertinent information, with their extension request.  The extension request must also include a statement that identifies any missing items, the reason these items are missing, and the steps that the taxpayer has taken to secure them. The request must be made in writing and sent to:

Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin,  TX   78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative

For affected taxpayers, time is of the essence. These filings must be evaluated and submitted within the next few days - by September 9, 2011. The reporting rules for foreign bank accounts are complex.  Many unsuspecting taxpayers may not be aware of their FBAR filing requirements and related tax liabilities.  The IRS has a dedicated section on its website that provides up-to-date information on the OVDI. It includes the full terms and conditions of the OVDI, as well as helpful sections with questions and answers for both taxpayers and tax practitioners. It can be found at the IRS website.

If you have questions, or if you would like more information on the 2011 Offshore Voluntary Disclosure Initiative, please contact your Kolb+Co. adviser or Steve D'Amato at sdamato@kolbco.com.