The so-called offshore voluntary disclosure initiative (OVDI) had been due to end on 31 August.
Some accounting industry observers suggested that in addition to Hurricane Irene, which is expected to disrupt much of the East Coast of the US beginning yesterday and today, the IRS may also have been thinking about the difficulties it faces in handling what is expected to be a huge and last minute rush of people filing OVDIs.
The OVDI scheme, unveiled in February, is aimed at encouraging Americans with offshore bank accounts to declare them, as part of the Internal Revenue Service’s ongoing effort to crack down on what it considers to be a widespread problem of willful tax evasion by American citizens and green card holders.
In particular, the IRS is said to be focusing on so-called Foreign Bank and Financial Account Reports (FBARs), which all American citizens with non-US bank accounts are obliged to file every year separately and in addition to their US tax returns. Until recently many Americans were unaware of this obligation.
In a statement on its website, the IRS said it had “extended the due date for offshore voluntary disclosure initiative (OVDI) requests until Sept. 9, 2011”.
The OVDI – which had been alluded to as long ago as last November by IRS officials, offers US tax evaders more onerous penalties than a previous scheme, but does not carry a threat of prosecution, if taxpayers come forward before it expires.
The previous scheme flushed out some 15,000 taxpayers with previously undeclared assets, according to the IRS. More than 3,000 additional taxpayers subsequently came forward.
Midnight oil burning
David Treitel, tax director at London-based US Tax & Financial Services, which advises Americans with complex tax matters, said he and his UST&FS colleagues have been “burning the midnight oil for a while now, finalising literally dozens of OVDI applications and extensions for OVDI applications” as the 31 Aug deadline approached.
He noted that in addition to pushing back its deadline, the IRS had also changed the tasks that need to be completed by the new deadline for anyone applying for an extension.
“We continue to handle five or six new cases every day, and have filed and settled some 200 to 300 of these "amnesty" cases already,” Treitel said.
But, he noted, the OVDI is not suitable for everyone, “and is not the only route for delivering tax returns to the IRS.
“Careful thought and advice is required before filing under the OVDI.”
