The Internal Revenue Service’s (IRS) third iteration of the Offshore Voluntary Disclosure Program continues to march through 2012 and indefinitely into the future. The IRS is reporting that at this point approximately 34,500 taxpayers have come forward and revealed their overseas or foreign accounts. As a result of these voluntary disclosures, the IRS has captured in excess of $5 billion in revenue, which includes previously unpaid taxes as well as penalties and interest on those past due tax liabilities.

The two prior versions of the Voluntary Disclosure Program occurred in 2009 and 2011. The IRS reopened the program in January when taxpayers continued to express interest in complying with applicable tax laws relating to offshore accounts. While there was a set deadline for taxpayers to take advantage of the 2011 program, the 2012 version has no such requirement. That does not mean, however, that the program will remain open forever. The IRS end or alter the terms of the program at any time. Of the taxpayers that have come into the Voluntary Disclosure Program, 1,500 have come in since January.

There are several important differences between the 2012 program and its predecessors. Under agreements with the IRS, some foreign countries have revealed tax information on financial accounts held by Americans in their nations’ financial institutions. In some circumstances, taxpayers have the right to appeal that decision in a foreign nation’s courts. In order to qualify for the voluntary disclosure program, the IRS now mandates that U.S. taxpayers inform the Justice Department of the appeal.

The IRS said that if the taxpayer fails to comply with this law and does not notify the U.S. Justice Department of the foreign appeal, the taxpayer will no longer be eligible for the Offshore Voluntary Disclosure Program. The IRS also put taxpayers on notice that their eligibility for OVDP could be terminated once the U.S. government has taken action in connection with their specific financial institution.

In addition, the IRS has increased the offshore penalty from 25 percent under the 2011 program to 27.5 percent under its current form. The reduced category 12.5 and 5 percent penalties are still available to qualifying taxpayers under the current program.

To read IR-2012-64 in its entirety, click here.