US taxman extends offshore disclosure deadline

The US taxman has extended its deadline for special voluntary disclosures by taxpayers with undeclared income from offshore sources to come forward.

Under the initial terms of the special provision, taxpayers had until 23 September to declare their foreign income, but the Internal Revenue Service (IRS) said it had decided in favour of the extension after accountants and lawyers reported being deluged by special requests from clients.

“By extending the deadline for a short period of time, the IRS is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it,” the body said.

The IRS may impose a 50% penalty on the balance of each offshore account for every year the account remains undisclosed under normal rules, as well as levying tax on any income earned from the foreign account.

If found guilty of wilful failure to declare foreign earnings, taxpayers may also face a fine equivalent to 75% of unpaid taxes and a penalty of $100,000 () or 50% of the balance of the offshore account.

If the earnings are declared by 15 October however, the taxpayer will be eligible for a reduced fixed penalty equivalent to 20% (reducible to 5% under certain circumstances) of the day the account held its highest aggregate value over the past six years.

Taxpayers with foreign earnings failing to meet the new deadline face harsher penalties, as well as possible criminal prosecution.

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